TPA says there are "gaping holes" in Labour's tax plan

May 07, 2017 11:05 AM

Key findings of analysis of Labour's tax proposals:

VAT

  • The VAT lock is specified as applying to the standard rate. It says nothing of exempt or zero-rated goods and services, for example insurance, foods, medicines, building supplies
  • This would also leave room for increasing the 5 per cent rate on domestic gas and electricity bills and more
  • It also leaves open the possibility of new "luxury goods" tax at an additional, higher rate

Income tax

  • The pledge refers explicitly to "earnings" rather than "income". This therefore excludes those whose incomes mostly derive from non-earnings, for example rental income and dividends
  • Non-earnings also includes income from pensions. If they are seriously proposing to treat these things differently it would get very complicated indeed
  • If it's simply poor wording and they actually mean income rather than earnings, they would have to change the income tax thresholds very significantly as they are currently: basic rate £11,500, higher rate £45,000 and additional rate £150,000. There isn't a threshold near £80,000
  • The £80,000 figure is also slightly above the level of an MP's salary
  • National insurance
  • The pledge is unclear what "personal National Insurance Contributions" refers to. A reasonable assumption is that it refers to employee's national insurance contributions
  • That leaves open possibility for increases in employer's national insurance contributions

Reacting to Labour's tax proposals, John O'Connell, chief executive of the TaxPayers' Alliance, said:

"Pledging to not increase taxes sounds good but unfortunately there are gaping holes in these proposals that will leave taxpayers and small businesses worried. A better way for the parties to demonstrate they are on the side of taxpayers would be to pledge to cut the overall tax burden and leave more money in the pockets of those who earned it."

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