A thinktank has called for a major reform of what it claims is an ‘inefficient’ tax system in Britain. It says that the country’s current system could be improved if it was replaced with a single rate on all forms of income.
The report was put together by the Institute for Public Policy Research (IPPR) and has outlined its recommendations to improve the British tax system. It says that in order to make the system more ‘progressive and efficient’, the proposed reforms would involve two elements:
- Firstly, it would combine all rates and allowances for employee national insurance contributions and income tax in a single tax schedule. This would apply to all incomes on an annual basis.
- Secondly, it would abolish tax bands in favour of a formula-based system where the marginal rate would rise according to each taxpayer’s precise level of income.
If the recommendations were brought in, the Institute for Public Policy Research believes that work incentives would improve and tax avoidance could be reduced as tax would not vary based on different sources of income.
It also claims that the new and improved system could allow the government to raise taxes without as much political opposition as it normally receives.
The IPPR report states:
“This variable treatment of different sources of incomes, combined with sharp ‘cliffs’ in the marginal rate between tax bands, creates perverse economic incentives, makes tax avoidance more likely and is far from transparent.”
If you would like to discuss your current tax liability, you need help with any part of your self-assessment tax return or you would like to speak to accountants in Camberley about any other aspect of your finances, please feel free to contact PKB and we will be more than happy to help.