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Tax day was a bit of a flop

24/3/2021

 
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The government released 30 consultations on tax reform on what it had dubbed as “tax day”. However, this has turned out to be a bit of a flop. The Treasury has announced some worthy tinkering around the edges. But the big issues in the tax system - how to tax wealth properly, what to do about property taxes and tackling the climate crisis - have been largely punted to another day.

At Tax Justice UK, we have set out an ambitious set of proposals for progressive tax reform as we build back from the pandemic. It’s likely that the government will announce further tax changes at the autumn budget. We will campaign to ensure that these are as progressive as possible. 

Tax avoidance
The government has proposed some small changes to tackle professionals who enable tax avoidance. This is a big problem. Often the promoters of tax dodging schemes get away with no punishment for helping clients slash their tax bills. The Treasury is planning to require all promoters of tax schemes to get insurance and is consulting on giving HMRC extra powers, including the ability to freeze the assets of promoters to ensure any penalties can be paid. 

However, this doesn’t go nearly far enough to tackle the problem. TaxWatch has recently highlighted how lightly tax fraud is treated compared to benefit fraud. Instead, what is needed is a big infusion of money into HMRC enforcement; prosecutions for tax dodgers and their professional enablers; and giving HMRC the data it needs to target those not paying their fair share. 

Climate 
Already heavily trailed, the government is planning to slash Air Passenger Duty on domestic flights. To compensate, it’s looking at increasing the levy on long haul flights.

In the face of the climate crisis, it seems foolish to be cutting the cost of flying. The government should have followed France’s approach, where the French government bailed out Air France on the condition that the airline scrapped short haul domestic flights that could be made by high speed train. 

Disappointingly, the Treasury also effectively ruled out a Frequent Flier Levy. This was a proposal for a progressive way of taxing flying - with every extra flight a person takes being taxed at an increasingly higher level. 

Wealth 
Tax Day was another opportunity for the government to begin the task of tackling the historic under-taxing of wealth in the UK. There are several opportunities to make the tax system fairer. As our research shows, the public wants to see a fairer tax system. 

For example, the Fairer Share campaign, which we support, is calling for the government to replace the broken council tax and stamp duty with a proportional property tax. At the moment, poorer households pay much of their income in council tax than richer ones. 
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Or the Chancellor could close the loophole that leaves unearned wealth taxed less than income from work. Aligning capital gains tax rates with income tax would make economic sense.  A recent poll found 61% support for this measure. The Office of Tax Simplification estimates it could raise up to £14bn a year. 
We’ll have to wait till the autumn budget to see potential action on these areas. 


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  • Home
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