General Election campaigns are rarely the best forum for debating tax reforms as the short term political imperatives always trump the medium and longer term economic requirements.
The UK has made some progress towards creating a tax system which rewards entrepreneurship and is attractive to inbound foreign direct investment, but other major economies are catching up and will overtake us if reforms are overly cautious in the year following the June 2017 Election.
There is an opportunity to improve and simplify our tax system, but will the incoming government seize it in its first 100 days? Read the top areas we believe the next government needs to consider post-election.
1. Business rates
The concerns about the impact of the business rates hikes in April need to be properly addressed and those businesses (especially SMEs) need a much more generous level of relief before longer term reform is introduced. The incoming government will risk business contraction (and even an increasing level of business insolvencies) if any additional reliefs introduced are penny-pinching.
2. Tax & NICs reforms post Taylor Review Report in June 2017
Although it is, in our view, almost inevitable that tax reforms will be introduced after the Taylor Review reports on modern employment practices, the incoming government must not see this as an opportunity to increase the overall incidence of taxation on business which is already taxed enough in the UK (indeed, over-taxed)
3. Tax avoidance legislation
We strongly support legislation introduced by recent UK governments to prevent tax abuse and aggressive tax avoidance from succeeding. During election campaigns it is invariably seen by the political parties as fertile ground accusing their opponents of proposing too little. The incoming government must ensure that this does not metamorphose into an attack upon perfectly acceptable – indeed desirable – authentic tax planning by businesses.
4. Incentivising business through tax reforms
There is a danger that focuses solely upon a single attribute such as the corporation tax rate or a particular relief for investment. The incoming government needs to recognise that tax system for UK businesses needs to competitive on a broad basis; focussing upon a single attribute is insufficient.
The incoming government should not rule out overdue simplification to taxation for business – and, indeed, individuals – if it immediately self-financing. It is worth accepting a short term fiscal cost to simplify the UK’s excessively complex tax legislation to secure a sounder, more predictable tax system to procure longer-term economic growth and improved employment.
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