Tax after coronavirus – evidence to Treasury Select Committee inquiry

• Neither changes in environmental factors nor changes in working practices are having a significant effect on public finances or the efficiency of the tax base. • Overwhelmingly, the major factors leading to pressure on public finances are arising from demographic trends. The Office for Budget Responsibility’s (OBR) reports on such matters are becoming ever-more bleak. • This problem arises because of decisions that could have been, but were not, taken from the early 1990s onwards. However, government policy since 2010 has exacerbated the problems caused by population ageing, and the current government has made things worse. This has been made clear in the OBR’s Fiscal Sustainability Report. • The fiscal situation is so serious that it is highly undesirable and probably impossible for all adjustments to fiscal policy to take place by increasing taxes. • Radical fiscal decentralisation and tax simplification would be desirable. Decisions should also be taken to reduce unjustifiable spending promises such as the triple lock on pensions. • Our tax system is incoherent and far too complex due to years of the tax system being used to make political points or respond to vested interests. • A range of radical tax simplifications and abolitions is proposed. Some of these would lead to more revenue being raised. • A wealth tax is wrong in theory and would be impossible to implement in practice. There are aspects of the tax system that allow certain forms of actual and imputed income from wealth to remain untaxed. These issues should be addressed directly, and there should not be a tax specifically on wealth. • The arguments concerning the corporate tax base and globalisation are over-egged. Corporation tax receipts continue to rise and the so-called “tax gap” has narrowed to the lowest levels recorded. However, there are reforms to corporation tax which could be considered on their own merits. • The Digital Services Tax has no merit and is a tax on innovation. It should be withdrawn. • Given the dire state of the UK tax system following the Brown/Osborne era and the perilous state of the public finances as a result of a number of short-term decisions being taken, it is necessary for the government to put “ideas” and “principles” above interests and articulate a clear tax policy. As many elements of reform as possible should be enacted simultaneously to avoid reforms being picked off or made more complex in response to lobbying.