The government has failed to address ‘underlying weaknesses’ in the UK tax system, according to a report from the Institute of Fiscal Studies (see www.bit.ly/1BUXYFo) on tax changes introduced by the coalition government says that.
The IFS said that as part of its deficit reduction programme, the coalition government has made tax changes whose direct impact is to reduce borrowing by an estimated £16.4bn in 2015/16. This net figure belies much larger changes, with £64.3bn of tax rises being partly offset by £48.0bn of tax cuts. ‘But all this activity has done little to improve the structure of the tax system,’ the IFS said. ‘The reforms introduced by the coalition have for the most part involved simply changing rates and thresholds with little attempt to address the fundamental structural deficiencies of the tax system. Plenty of challenges remain for whoever wins the election in May.’
The report also argued that the rise in the VAT rate from 17.5% to 20%, together with a ‘sharp reduction in the amount that can be saved in tax-privileged pensions, and a 1% increase in all rates of NIC … all of these exacerbate unwelcome distortions in the tax system’ and that the difference in treatment of the income tax allowance and corresponding NIC thresholds ‘makes little economic sense’. The IFS also found that the cut in the corporation tax main rate made the UK more competitive internationally but ‘its base continues to discourage investment and to favour using debt to finance it’.
The government has failed to address ‘underlying weaknesses’ in the UK tax system, according to a report from the Institute of Fiscal Studies (see www.bit.ly/1BUXYFo) on tax changes introduced by the coalition government says that.
The IFS said that as part of its deficit reduction programme, the coalition government has made tax changes whose direct impact is to reduce borrowing by an estimated £16.4bn in 2015/16. This net figure belies much larger changes, with £64.3bn of tax rises being partly offset by £48.0bn of tax cuts. ‘But all this activity has done little to improve the structure of the tax system,’ the IFS said. ‘The reforms introduced by the coalition have for the most part involved simply changing rates and thresholds with little attempt to address the fundamental structural deficiencies of the tax system. Plenty of challenges remain for whoever wins the election in May.’
The report also argued that the rise in the VAT rate from 17.5% to 20%, together with a ‘sharp reduction in the amount that can be saved in tax-privileged pensions, and a 1% increase in all rates of NIC … all of these exacerbate unwelcome distortions in the tax system’ and that the difference in treatment of the income tax allowance and corresponding NIC thresholds ‘makes little economic sense’. The IFS also found that the cut in the corporation tax main rate made the UK more competitive internationally but ‘its base continues to discourage investment and to favour using debt to finance it’.
