Business leaders and a campaign group have proposed a single 30 per cent rate of income tax and more public spending cuts to boost growth.
Stamp duty and national insurance should be abolished in a simplification of the UK’s tax system, according to the 2020 Tax Commission’s study.
The changes would lead to a £3,400 tax cut for a two-earner household with an income of about £28,000, which could result in an 8.4 per cent rise in the UK’s GDP after 15 years, according to the report.
A 30 per cent tax rate should be applied to income and capital, said the commission, which is a joint project between the Institute of Directors and the TaxPayers’ Alliance.
The plans call for national insurance contributions to the scrapped and a single 30 per cent tax rate on income, with a £10,000 personal allowance. Capital gains tax and corporation tax would be abolished in favour of a 30 per cent tax on rent, interest and dividends.
Air passenger duty would be axed, along with inheritance tax and stamp taxes on shares, while there would also be a 5p cut to fuel duty under the plans.
Public spending and taxation would be restricted to a third of national income, so government expenditure would be cut until 2020.
The budget deficit would be increased by £49.1bn in the first year if the changes were not brought in gradually or if there was no additional reduction to public spending.
However, the commission believes there would be a boost to the economy leading to a £35bn drop in annual borrowing after 15 years.
City AM editor and 2020 Tax Commission chairman Allister Heath said: “It is time for Britain to make a vital choice between tweaking the status quo and letting our economy continue to be crippled by complex and punitive taxes, and drastically changing course with a radical but realistic plan for a tax system fit for the 21st century.”
TaxPayers’ Alliance chief executive Matthew Elliott said: “Right now the government’s first priority has to be strong economic growth to create jobs and ease the pressure on families struggling to make ends meet. Tax reform is essential to make that possible.”
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