The Treasury select committee has announced:
TREASURY COMMITTEE LAUNCHES INQUIRY INTO THE FUNDAMENTAL PRINCIPLES OF TAX POLICY
In the last month, the OECD in Paris and the IFS in London have each published important reports into the fundamentals of tax policy.
The OECD reports that the tax system should distort economic incentives as little as possible and that "corporate taxes are the most harmful type of tax for economic growth, followed by personal income taxes and then consumption taxes, with recurrent taxes on immovable property being the least harmful tax."
The Mirrlees Review, published by the IFS, argues that the tax system should be considered as a whole with the benefit system, seek neutrality, and achieve progressivity as efficiently as possible.
The Office of Tax Simplification has revealed that there are over 1,000 reliefs in the UK tax system.
The Treasury Committee has decided to launch its own inquiry into the principles which should underpin the tax system, and invites written evidence on the following points:
* What are the key principles which should underlie tax policy? * How can tax policy best support growth?
* To what extent should the tax system be structured to support other specific policy goals? * How much account should be taken of the ease and efficiency with which a particular tax can be imposed and collected? * Are there aspects of the current tax system which are particularly distorting?
I feel a report coming on. The deadline is 12 noon on Friday 14 January 2011. That looks like Christmas is cancelled…..
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It’s always struck me as odd that we continue to have income tax and National Insurance. There are probably some reasons for keeping two systems in place, but it must cause a great deal of administration and record keeping.
Neither do I understand why there is a cap on NI contributions. Instead of introducing a 50% tax rate for £150k+, it might have been easier to remove the NI cap and have everyone employed pay 11%. This would hit the £43k to £150k category in particular, but in the future many of these will be repaying 9% towards their student loan – and many of those in that category have already benefitted from a free university education.
It seems a simple solution to me: remove the NI cap and charge 11% which removes the need for the £150K tax band, and close down the whole student loan administrative system.
I don’t understand the statement from OECD that ‘corporate taxes are the most harmful type of tax for economic growth’. If as you recently said elsewhere on this blog that ‘it is small business that creates jobs and wealth, not big business as evidence has shown time and again’, that vast burden of taxation falls on employment (income) tax and NI, and that unrestrained debt-fuelled corporate growth is highly unstable and ultimately unsustainable, then surely it is not corporation tax (with its relief on interest on payments on debt) that is the most harmful, but taxes on labour. If it is job creation rather than debt that creates growth, then the right policy would be in reducing NI and income tax while capping or reducing the relief available to corporate debt. A better balance can be found between taxes on labour and on capital.
@David Marks
You’ve got it
they haven’t
If the third direct tax, on land, was applied, taxes on labour could be lowered without upping corporation tax. It’s a shame that Mirrlees, whilst lauding land value taxation, chose to give no indication of the potential revenue – thus all media comment has ignored this part of his review. Anyway, thanks Richard, for alerting us to this new inquiry.