In an interesting op-ed in the Observer, the Shadow Chancellor had plenty of advice for Alistair Darling, as he takes over the reins at the Treasury. In one of the key parts of the article, Mr Osborne wrote: “Britain’s businesses will be held back so long as we have some of the highest corporate taxes in the developed world. Your first Budget is nine months away. That is plenty of time to prepare a programme of major tax reform. Your objective should be simpler taxes and lower tax rates. You should also shift the tax burden away from income and onto pollution and examine the case for a reduction or abolition of stamp duty on shares.”
It’s good that George Osborne is talking about cutting tax rates and simplifying the system, and we applaud him for that. But as he made clear after March’s Budget, cries of “tax con” will follow unless the overall tax burden is reduced at the same time. Unfortunately, other than an imprecise promise to “share the proceeds of growth” between public spending and tax reductions (which if shared in the wrong proportions could actually lead to a higher tax burden) and reduce the tax burden over an economic cycle (which if it is as long as the previous cycle could last for ten years), nothing is forthcoming from the Shadow Chancellor. If he could only be a little bolder in his plans to relieve families and businesses from the record tax burden, taxpayers would applaud him all the louder.
New calculations by Mike Warburton and Maurice Fitzpatrick at Grant Thornton are yet more evidence of the damage that has been done by Gordon Brown’s removal of tax credits on dividends. They show that an estimated three million investors in personal equity plans (PEPs) and equity-based individual savings accounts (ISAs) have lost an average of £2,000 each, or £6 billion in total, over the last eight years.
The reason for this is very simple. Until 1999 investors could reclaim 20 per cent of the tax that they were due to pay on dividends generated from equity investments within PEPs. In 1999 Gordon Brown replaced PEPs with ISAs and halved the benefit, allowing investors to reclaim a maximum of 10 per cent. In April 2004 he removed that benefit altogether.
The £6 billion figure includes not only the direct reduction in income, but also the knock-on effect of the loss in investment returns had that extra money remained in the PEP or ISA. So not only has Gordon Brown whacked pensions, he has also damaged non-pensions saving.
And the result? The savings ratio has dropped from 10 per cent in 1997 to only 2.1 per cent, the lowest level in almost 50 years. Not something for Gordon Brown to shout about.
TPA response to Tax Freedom Day, which in 2007 fell on 1 June. The report compares estimates of Tax Freedom Day in other countries.
This report analyses official data for the last 20 years and finds that the gap between the tax burden facing the poorest fifth and the richest fifth of households has widened under Gordon Brown. The poor pay higher taxes than the rich.
The TPA commissioned the respected Centre for Economics and Business Research to build a dynamic model of the UK, to show how tax reductions will benefit the economy. This report explains how the model was set up and simulates a reduction in the corporation tax rate to the Irish rate of 12.5 per cent over nine years. The results are quite dramatic!
In advance of the Budget in March 2007, the TPA detailed a large number of countries abroad that had cut taxes in the past two years, putting pressure on Gordon Brown to follow suit.
…Nobody, but if current trends continue, by 2015 the average houshold will be paying £1 million in direct and indirect taxes over a lifetime.
This report shows how, if Gordon Brown had not increased the tax burden, the basic rate of income tax could have been cut to just 10 per cent.
A fair income tax which taxed all income at the same percentage would dramatically improve incentives, while bureaucracy could be dispensed with almost entirely. This idea, already sweeping Eastern Europe, is the ‘flat tax’.
Published by The TaxPayers’ Alliance and The Stockholm Network
You can order a copy of the flat tax pamphlet by either:
- Sending a cheque for £10 to The TaxPayers’ Alliance, 1 Warwick Row, London, SW1E 5ER
- Sending the TPA £10 via the PayPal button below (You do not need to create a PayPal account, simply use the first option on the page):
Or, Download Flat Tax: Towards a British Model by Allister Heath
The TaxPayers’ Alliance responds to the Tax Reform Commission report.
How much will the average person pay in tax during their lifetime? Find out in this TaxPayers’ Alliance Research Note.
Media Coverage
- BBC News Channel: Graeme Leach from the Institute of Directors (IoD) discussed the joint TPA/ IoD 2020 Tax Commission final report
- BBC Radio Coventry and Warwickshire: Matthew Sinclair discussed the joint TPA/ IoD 2020 Tax Commission final repor
- LBC 97.3: Matthew Sinclair discussed the joint TPA/ IoD 2020 Tax Commission final report
- Coffee House The Spectator Blog: No time to tinker
- Sky News: Northern Rock Rescue ‘Costs Taxpayer £2bn’
- This is South Wales: Anger at £426k pension payouts for councillors
- Huffington Post: Northern Rock Rescue ‘Cost Taxpayers £2bn’ but was best deal, says report
- City A.M: Facebook’s bubble inflates while Eurozone’s deflates
- BBC Radio York: TPA Campaign Manager Robert Oxley discussed the quarter of a million pound pay out to a form police chief who did not have his contract renewed
- Evening Express: Warning bailing out Northern Rock could cost taxpayer £2bn
