Taxes are too high and too complicated – it’s time for urgent reform
A week ago, this newspaper bemoaned the government's drift towards tax rises – and the lack of any proper low-tax Tories coming to the fore.
Without a doubt, Jeremy Corbyn's Labour has shifted the Overton Window (the range of policies deemed acceptable by politicians) and the debate now largely concerns which taxes to raise and by how much. The Tories have pledged an additional £20bn for the NHS, after which Corbyn pledged £22bn while still managing to criticise the government for not explaining where the money was going to come from.
We know where it will come from: future tax rises.
However, the truth is that taxes have been rising steadily for some time, and so has the level of complexity that now means our tax code resembles a giant mass of tangled string.
While tax rises are on the cards, new research from accountants UHY Hacker Young lays bare the extent of new taxes introduced since 2008/9. In total, eight major new taxes have been levied since the credit crunch, including the sugar tax, the diverted profits tax, the bank surcharge (which imposes an eight per cent corporation tax charge on profits above £25m) and the apprenticeship levy.
These measures have raked in nearly £30bn for the government. The apprenticeship levy was designed to increase the number of apprenticeships, but has failed miserably – with the number of new places declining. The bank surcharge was designed to be temporary, but will almost certainly remain a permanent fixture. Once a government figures out a new way to raise taxes it rarely abandons it. Income tax, after all, was designed to be temporary.
It is not just the level of taxation that should cause concern, but the complexity of the system. This government, like ones before it, talks about tax simplification yet with each new levy another strand is weaved into a complex web.
Now that the government has set out the kind of Brexit it wants, politicians should focus on the longer-term picture, and plan for a post-Brexit tax regime that incentivises investment, reduces complexity and eases the burden on people and businesses.
As Darren Grimes of UHY Hacker Young says today, “Every new tax sounds superficially attractive with admirable ends but every new tax makes the UK a harder place to do business and helps put off inward investment.”