Opinion: Creating a fairer tax system

As Benjamin Franklin wrote back in the eighteenth century, “in this world nothing can be said to be certain, except death and taxes”. So while tax policy may not set hearts racing, anything that takes money from people’s pockets will provoke a strong response.

Already, in government, we’ve had major successes. Our flagship tax policy of a £10,000 tax-free allowance is being implemented, which will provide millions of taxpayers with an tax cut of £705 per annum by the end of this Parliament; we’ve raised capital gains tax for higher rate taxpayers; and we are clawing back £7bn worth of tax through a clamp down on avoidance.

So where should we go next?

The Federal Policy Committee (FPC) has established a working group on tax, which I chair. You can read our consultation paper here. Our aim is to present a policy paper to Conference in Autumn 2013.

We believe some fundamental challenges are:

  • How do we create a tax system that is fair? What should we do to achieve a tax system that is progressive in relation to income and wealth; that ensures those earning the lowest wages are not disadvantaged by working; where wealthy individuals and businesses make their fair contribution; and those who seek to avoid paying tax are prevented from doing so?
  • How do we create a tax system that is simpler, easier to understand and more predictable? One with less complicated rates and reliefs – especially for pensioners and small businesses – and which is characterised by well publicised overarching roadmaps for strategic reform.
  • How do we create a tax system that is greener? One that taxes environmental pollution and resource depletion and gives bigger incentives to sustainability and the responsible use of resources.
  • How do we create a tax system that is more decentralised? So that there is a clearer link between local services and local accountability and greater freedom for democratic local government to raise, and spend, revenue.
  • How do we create a tax system that is more efficient? Recognising the importance of incentives to work and save; and growing global competition.

On Saturday 22nd September, we will be taking our work to the Party’s Autumn 2012 Conference, in order to hear members’ views. There will be a consultative session between 10am and 12.30pm in the Grand Hotel (Charlotte Room), to which I would like to invite all interested conference attendees.

I’m also aware that many people, for one reason or another, are unable to come to Conference but would still like to participate in the policy process. We will be undertaking a survey of members shortly but should you wish to respond to our consultation paper, please direct your comments to Kevin Norton at [email protected]

* Jeremy Hargreaves is a vice chair of Federal Policy Committee and the Federal Board.

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  • JBT states,

    “I wholeheartedly approve of seeking a tax system that is efficient and simple, and hope that people responding to this discussion document are fully acquainted with the Mirlees Report.”

    I echo his sentiment but note that only the most intrepid of members will have invested the time to become fully acquinted with the Mirlees Report. The consultation paper itself asks for responses to 74 questions – each requiring explanation and substantiation of the responses given. This is the nature of technical consultations.

    We need to keep in mind a key finding of the Mirrlees – that tinkering with the current system will make little difference – only wholesale reform of a fundamentally flawed system can do the job.

  • Sorry, Richard Murphy is absolutely *not* the place to look for anything on tax policy – it is pure agenda-driven polemic and has been comprehensively rebutted on numerous occasions on the members-only forum of this site!

  • Peter Davies 21st Sep '12 - 8:24am

    Right now, the price of beer is going up. In these circumstances, the friendship would surely be deepened by the richer guys paying most of the extra bill.

  • Jedi – in your example – does the rich guy own the pub? Is most of his income taxed at a lower rate because its not classed as income? Does he get tax breaks not available to the other 9? Does the 1 employ a hatful of lobbyists to steer lawmakers? Does he actually sit with the other 9, or does he sit in his own section and argue that as he isnt sitting with the other 9, he shouldnt have to pay towards their drinking? Just wondered…

  • Jedi, I’ve been that 1, does this mean I have earned the right to have an opinion in your world? Don’t assume that everyone in the top 10% of earnings is a Tory.

  • Jeremy Hargreaves 23rd Sep '12 - 8:37am

    Thank you everyone for your comments, which we will discuss. We also had an excellent three hour consultation session in Brighton yesterday.

  • On the £10,000 personal allowance

    This has not yet been implemented in full. Can the Treasury afford to carry out its plans and give away a further £1800 per working person in the climate it finds itself, given the way it’s current plans are going awry? I personally don’t think so. Further, this allowance is universal and so is not, in itself, favouring the less well off in society.

    Now we know that there are many hugely rich people out there who are avoiding much more than £10000 a year, and there are still many of them paying less in tax than their cleaners. Now we have heard much about the team which is supposedly stopping tax evasion. Have we seen how much this unit has brought into the treasury, how many have been prosecuted? Much more telling is that it has not even addressed tax avoidance – have the offshore accounts been forcibly closed down?

    There is no fairness in the tax system and under this government there will not be any moves to make it more fair

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