A reform of the UK’s ‘regressive and unfair’ tax system is urgently needed and would contribute significantly towards paying off the public debt, according to Compass.
The left-leaning think-tank has published a new study that posits a number of measures to make the country’s taxation set-up more balanced, with top-earners bearing the greatest financial burden.
The document insists that modernising public services and a greener social infrastructure should be priorities for the Government, and it states the belief that tax reform would alleviate the need for spending cuts 'of the sort announced by the Chancellor in April 2009'.
'Britain is not bankrupt,' says Compass. 'British taxes are not, historically, too high - but they are structurally regressive and unfair.'
The organisation's new paper suggests that the £45 billion gap forecast by the Institute for Fiscal Studies for 2014/18 can be plugged. This would be done through a series of tax reforms that would raise additional revenue equivalent to approximately £47 billion.
Suggested measures include:
- A 50% income tax band for gross incomes above £100,000.
- Minimum tax rates of 40% and 50% on incomes above £100,000 and £150,000 respectively.
- The uncapping of National Insurance contributions such that they are paid at 11% throughout the income scale (although pensioners would be exempt).
- A lower income tax band tax band of 10% below the poverty line, and a basic rate of 22%.
- Minimising of tax avoidance by requiring tax havens to disclose information fully.
- Urging all small limited companies to re-register as limited liability partnerships, to reduce opportunities for tax avoidance.
The crucial cumulative impact of these changes, claims the study, is that they benefit 90% of taxpayers because only the top 10% - the highest earners - are asked to pay more.
'Tax reform is not an optional extra,' says Compass. 'It is an urgent priority if recession and stagnation are to be avoided and the basis laid for a sound, sustainable and prosperous future.'