Ahead of the general election, the Institute of Directors (IoD) is calling on the next government to merge or scrap taxes which raise under £5bn a year as part of a radical reform of the tax system
The IoD’s head of taxation, former BDO tax partner Stephen Herring, said there was a need for a complete overhaul of taxation rather than ‘piecemeal, overly-complex revisions’ to what he described as ‘the already monstrous tax code’.
Under the IoD proposals, outlined in a pre-election paper, any tax which brings in less than £5bn would be challenged annually, with a view to its repeal or merger with other taxes. Stamp duty on shares (raising £3bn) and air passenger duty (£3bn) would be in the firing line, while the IoD wants to see capital gains tax (£5bn) and inheritance tax (£5bn) merged, so that capital is only taxed once and at a rate sufficiently low to obviate the need for more complex reliefs.
Herring said: ‘The basic principles here are that taxes should be focused purely upon the fiscal revenues collected and their wider economic impact. They should not be confiscatory, punishing or unduly complex.’
‘We have been disappointed with the pace of tax reform under the Coalition, and a more radical agenda for tax reforms is now needed.’
Herring said that proposals for any new taxes should also be carefully analysed with regard to their efficiency, their collection costs and the possibility of undesirable and unforeseen consequences. ‘Two worrying examples of where these concerns have not been thought through include the coalition’s proposed diverted profits tax and the opposition’s proposal for a mansion tax,’ he said.
The paper, IoD Priorities for Tax Reform, lists a number of other proposals, including triple-locking tax thresholds so they increase each year by the highest of consumer price inflation, earnings growth or 2.5% per annum, and abolishing the 45% additional rate of income tax.
It also suggests allowing trading companies to opt out of corporation tax by electing for s ‘tax transparent’ treatment on a similar basis to the successful ‘S-Corporation’ regime in the US, and more business tax cuts for middleweight entrepreneurial businesses which it says have benefited much less than multinational companies and microbusinesses from coalition tax reforms.
Herring said: ‘We consider that the measures proposed will accelerate the progress of the UK’s tax system towards simplicity, incentivisation and enhancing the attractiveness of the UK for both entrepreneurs and foreign direct investment.’
The IoD paper is here: www.iod.com/~/media/167F746547624CEC832CC010DAD05904.ashx
