Tax simplification at the Institute of Directors

"Tax reform and simplification" was the subject of an interesting panel debate last Thursday night at the Institute of Directors. I made the case for abolishing stamp duty (both on commercial property and share transactions) for business taxes, and the top rate of tax for personal tax.

Also on the panel were Jolyon Maugham QC, a tax barrister and Labour activist; Judith Freedman, a professor of taxation law at Oxford University; and Heather Self, an accountant partner at law firm Pinsent Masons. The two sessions were chaired by IoD's chief economist James Sproule and head of taxation Stephen Herring.

My first choice for personal taxation reform would have been merging national insurance and income tax (see here for some of the TPA work on the subject which I've been involved with), but Judith Freedman had covered that, and expertly made its case. I found myself in the unusual position of feeling more optimistic than her when she complained that the government's new consultation rules out raising tax on other income classes, such as dividends. She believed that this largely removes the point of merger. I disagree. I would argue that the primary benefit of a merger is transparency, from which enhanced legitimacy and simplicity will subsequently follow as hard-to-justify disparities become so much more obvious than under the current system of smokes and mirrors personal income taxation.

Photo: James Sproule

Photo: James Sproule

Heather Self made a case for family taxation which bore some resemblance to the transferable allowances advocated in the 2020 Tax Commission's Single Income Tax. Finally, Jolyon Maugham argued persuasively for a full review of "tax expenditures", the reliefs and exemptions for various activities which operate effectively as an spending programme would do, albeit with less scrutiny than they would bear if they were spending items.

While there were plenty of points of disagreement, it was remarkable how much common ground there was, too. Testament to how broken the British tax system is, and how much room there is for a wide range of people to agree on some of the challenges which governments need to address.