More evidence that high taxes are hurting the UK's economy

June 25, 2012 12:28 PM

Last week witnessed a damning report on the UK tax system and the damaging impact it is having on attracting investment into Britain. Today a new report by accounting firm UHY Hacker Young paints a similarly grim picture on the overall size of the tax burden. This adds further weight to the recent withering condemnation of the government’s tax policy by major firms. UHY states that the UK is in jeopardy of “losing jobs and investment to overseas competitors” due to its hefty tax burden.

The report’s major focus for criticism is the percentage of GDP drained by the tax burden. On the narrow measure used Britain’s comes in at 34 per cent, which does not compare favourably with our competitors abroad. Japan sets a modest 23 per cent while the USA demands a similarly lithe 24 per cent. These two nations aren’t outliers, either. The G8 group of eight large industrialised nations imposes an average tax burden of just 29 per cent.

Meanwhile, with government spending at roughly half of GDP, the scope for reducing tax might appear to be limited. But something has to be done to kickstart the economy into growth and the famous words of Winston Churchill should enlighten those who claim that Britain ought to raise taxes and spending instead of cutting them more:

“I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”

The 2020 Tax Commission maps a way out of our harmful taxation system and shows how to implement one that is both fair and rational. With the Centre for Economics and Business Research demonstrating that within 15 years the proposals could boost business investment by 61.2 per cent and GDP by 8.4 per cent, policy makers cannot avoid the central recommendations of the report: a reduced tax burden, a simpler tax system, and fewer taxes.

It’s worth bearing in mind what 8.4 per cent higher GDP would mean to ordinary taxpayers, too: an extra £5,000 for every family in the country, a much needed and long overdue relief for those of all incomes. Politicians and officials do not have to look any further for the answer to the UK’s notorious tax woes. It’s time they started getting to work implementing the Single Income Tax.Last week witnessed a damning report on the UK tax system and the damaging impact it is having on attracting investment into Britain. Today a new report by accounting firm UHY Hacker Young paints a similarly grim picture on the overall size of the tax burden. This adds further weight to the recent withering condemnation of the government’s tax policy by major firms. UHY states that the UK is in jeopardy of “losing jobs and investment to overseas competitors” due to its hefty tax burden.

The report’s major focus for criticism is the percentage of GDP drained by the tax burden. On the narrow measure used Britain’s comes in at 34 per cent, which does not compare favourably with our competitors abroad. Japan sets a modest 23 per cent while the USA demands a similarly lithe 24 per cent. These two nations aren’t outliers, either. The G8 group of eight large industrialised nations imposes an average tax burden of just 29 per cent.

Meanwhile, with government spending at roughly half of GDP, the scope for reducing tax might appear to be limited. But something has to be done to kickstart the economy into growth and the famous words of Winston Churchill should enlighten those who claim that Britain ought to raise taxes and spending instead of cutting them more:

“I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”

The 2020 Tax Commission maps a way out of our harmful taxation system and shows how to implement one that is both fair and rational. With the Centre for Economics and Business Research demonstrating that within 15 years the proposals could boost business investment by 61.2 per cent and GDP by 8.4 per cent, policy makers cannot avoid the central recommendations of the report: a reduced tax burden, a simpler tax system, and fewer taxes.

It’s worth bearing in mind what 8.4 per cent higher GDP would mean to ordinary taxpayers, too: an extra £5,000 for every family in the country, a much needed and long overdue relief for those of all incomes. Politicians and officials do not have to look any further for the answer to the UK’s notorious tax woes. It’s time they started getting to work implementing the Single Income Tax.

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