Embargoed: 00:01 Friday 11th October
In a paper released today, the TaxPayers' Alliance (TPA) calls for a package of tax cuts which could bring the country together in a 'no-deal' scenario.
The new research suggests tax policy changes which - in the event of leaving without a withdrawal agreement - the government could pursue to promote a competitive, low-tax and pro-enterprise economy. With the Brexit debate increasingly polarised, the TPA 'no-deal peace package' includes measures which are tailor-made for the stereotypes of both provincial leave voters and metropolitan remainers.
The TPA does not take a position on whether or not the UK should leave the EU. However, it is important that, in any possible situation arising from that decision, taxpayers’ interests are represented.
The research includes a foreword from Stephen Herring, former tax partner at BDO and former head of taxation in the Institute of Directors policy unit.
In the event of the UK leaving the EU without a withdrawal agreement, rather than spending more taxpayers’ money, fiscal policy should be targeted at enhancing growth, productivity and business confidence.
A popular package of reforms targeted at five key taxes, each with optional moderate or strong responses plus a short-term and long-term measure, could provide a required confidence boost among both businesses and consumers. A package of strategic tax cuts would also sharpen incentives across the economy, enhancing investment, productivity and earnings. The five key taxes are:
- Corporation tax
- Business rates
- Income tax
- Stamp duty land tax
- Air passenger duty
For provincial leave voters:
- Corporation tax. Increase the annual investment allowance from £1 million to £5 million. Estimated impact on receipts of up to £4.3 billion in 2020-21. This would allow a plant in Stoke to save £680,000 when investing £5,000,000 in new machinery, and therefore create more local jobs. In the long term, cut the rate from 19 to 12.5 per cent, to match Ireland.
- Air passenger duty. Halve the rates from £13 and £78 on economy class seats to £6.50 and £39. Estimated impact on receipts of up to £1.2 billion in 2020-21. A family of four (two parents, one adult teenager and one younger child) flying to Florida for their summer holiday at Disney World would save £117 on their air fares. In the long term, abolish entirely.
For metropolitan remainers:
- Business rates. Cut the multiplier to 40p or 30p. Estimated impact on receipts of £4.4 billion or £8.3 billion in 2020-21. This would boost coffee shops in Islington by cutting their rates by up to £10,404, based on an illustrative rateable value of £51,000, allowing them to reduce the price of their coffees. In the long term, reform the appeals system to include changes in economic circumstances.
- Stamp duty land tax. Raise the threshold from £125,000 to £500,000 or £1 million. Estimated impact on receipts of £3.3 billion or £4.4 billion in 2020-21. This would cut the cost of buying a £1 million family flat in Hampstead by up to £43,750. In the long term, abolish entirely.
For all taxpayers, however they voted:
- Income tax. Cut the basic rate from 20 to 18 per cent or 15 per cent. Estimated impact on receipts of £9 billion or £22.5 billion in 2020-21. This would provide an average taxpayer earning £28,253 with a tax cut of up to £788, while a higher (or additional) rate taxpayer on £56,506 would save up to £1,875. In the long term, merge with national insurance into a single tax on income.
John O'Connell, chief executive of the TaxPayers' Alliance, said:
"The Brexit debate is polarised, but as this research shows, we can all agree on the need to cut taxes and boost the economy in the event of no deal.
"Whether it be investment in world-beating manufacturing up north, or unclogging the housing market in a global city like London, there can be something for everyone in a no-deal budget. What's more, a cut in the basic rate of income tax would put money in everyone's pockets and restore a bit of badly-needed confidence in Brexit Britain.
"Instead of bickering and blaming each other in a no-deal scenario, we should get together and call for the kind of tax cuts which benefit our economy and, ultimately, everyone in our country."
Stephen Herring, former head of taxation in the Institute of Directors policy unit and research fellow at the TaxPayers' Alliance, said:
"Few people view leaving the EU without an agreement as the most desirable outcome, though much like the rest of the country, business people hold a range of views on what should happen next.
"There will be considerable - and entirely understandable - pressure on government to respond with changes to fiscal policy. By focusing on taxes that are getting in the way of investment, earning, moving to take up new jobs or travelling to win export business and attracting tourists to the UK, the policies we suggest would provide meaningful help to consumers, businesses and entrepreneurs, resulting in material benefits which can be enjoyed by everyone, however they voted.
"A ‘no-deal’ Brexit represents a unique scenario for the British government, with incentives to think boldly and creatively about our fiscal response and how we can bring people back together."
TPA spokesmen are available for live and pre-recorded broadcast interviews via 07795 084 113 (no texts)
Political Director, TaxPayers' Alliance
24-hour media hotline: 07795 084 113 (no texts)
- Founded in 2004 by Matthew Elliott and Andrew Allum, and now with 80,000 supporters, the TaxPayers’ Alliance (TPA) fights to reform taxes, reduce spending and protect taxpayers. Find out more about the TaxPayers' Alliance at www.taxpayersalliance.com.
- TaxPayers' Alliance's advisory council.
- The TaxPayers' Alliance position during the 2016 EU referendum can be found here: https://www.taxpayersalliance.com/the_tpa_and_the_eu_referendum