Think Tank Sets Out Flat-Rate Tax Shake-Up Plan For UK

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July 15th 2020
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Think Tank Sets Out Flat-Rate Tax Shake-Up Plan For UK

Institute of Economic Affairs proposes a new tax system that benefits both top and bottom income brackets, reduces the size of the state and increases GDP.

Since 1955 the IEA has been attempting to solve economic and social issues for institutions moving toward a free society. In its latest report the think-tank focuses upon taxation and government spending.

The main findings in the report include:

  • An upward trend in taxation and government spending over the last 100 years. Government now spending 40-45 percent of national income, similar to Germany, but higher than countries such as Ireland, US, Canada, Australia and New Zealand.
  • Government spending has actually increased since 2010.
  • Cutting tax on historical models shows rise in output.
  • The UK tax system negatively affects economic growth in its current state.

The report proposes that the following should be implemented in order to stimulate growth and address the issues found:

  • Abolish twenty taxes - including national insurance, corporation tax, capital gains, council tax, inheritance tax, business rates, duties and the TV licence fee.
  • Tax system should raise 20-25 percent of national income.
  • Flat rate income tax rate of 15 percent.
  • Personal Allowance of £10,000 for everyone.
  • Profits from companies would also be taxed at 15 percent.
  • 12.5 percent VAT - with no exempt classes
  • Halved fuel duties
  • Housing consumption tax similar to VAT - based on rents or represented rents.

Modelling figures by the IEA shows that with the new tax system in place the poorest would see 26 percent tax cuts with even those in the richest categories seeing tax cuts of 7 percent. The country would see GDP growth rate rise by 0.8 percent.

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