06 Mar 2018
Think-tank calls for overhaul of UK tax system
A report by the Institute for Public Policy Research (IPPR) has called for an overhaul of the UK’s current tax system, and suggested replacing it with a single rate on all types of income, including salaries, savings, trusts, dividends or any other form.
The report – titled Tapering over the Tax – claimed that scrapping the current system of tax bands could give average earners over £1,000 extra each year without any negative effect on the tax intake of the government.
The IPPR said that anyone earning below £44,400 could see the average amount of tax they pay fall, while the very richest in society would pay more of their income proportionally than other income groups.
The IPPR said:
“A tax system designed this way would be more progressive and more efficient, and would enable government to raise taxes more fairly and more easily if required.
“By improving work incentives for low earners, as well as the variable treatment of different sources of income, perverse economic incentives and deliberate tax avoidance would be reduced”.
It also highlighted the issue of tax relief on pension contributions, where individuals with higher incomes receive a higher amount of tax relief than those on lower incomes, which makes the system seem more regressive, rather than progressive as it was designed.
By making these changes to the tax system, the IPPR claims the government could increase its revenue by as much as £16 billion per year, while keeping incomes for the poorest two-fifths of households rising.