20 taxes to scrap: How to grow the UK economy by simplyfying the tax system

Abstract

The five-year average tax burden in the UK is now at a 70-year high. The impact and opportunities of Brexit, coupled with the need to revitalise the economy in the wake of the COVID-19 crisis, mean 2021 would be a good time for the government to embark on a tax-cutting programme. This paper analyses twenty taxes that could be scrapped or significantly changed. If carried out, these reforms would simplify the tax system, reduce the overall burden of taxation, and eliminate harmful distortions that stifle the UK’s productivity and prosperity. The TV Licence, Inheritance Tax, Stamp Duty Land Tax, stamp duties on buying shares, Apprenticeship Levy, Vehicle Excise Duty, Capital Gains Tax, the bank surcharge, and duties on alcohol, tobacco, and gambling, could be scrapped. Other property taxes, such as Council Tax, Community Infrastructure Levy, business rates, and affordable housing and other s106 obligations, could be replaced with a single land value tax. Under this proposed system, disincentives for property improvements and housebuilding would be removed. The Climate Change Levy and renewables obligations add economic distortion and complexity to the tax system and could be revamped into either through the Emissions Trading Scheme or a comprehensive carbon tax. Corporation Tax and the Diverted Profit Tax could be replaced with a single tax on capital income administered at the corporate level, similar to how PAYE works on wages. Doing so would promote neutrality between capital income and labour, eliminate the debt-capital bias, and spur productivity growth.