Radio 4’s “the Briefing Room” had an interesting discussion yesterday about how the increased government spending the Conservative and Labour parties are proposing, might be funded. The debate was amongst tax professionals not politicians.
The participants considered whether income and corporation taxes should be raised and whether there should be increased wealth taxes.
The view was that corporation taxes have to remain competitive in comparison with other countries, which would limit how much they can be increased and a fear that increased corporation taxes might limit economic growth.
It was pointed out that there was a “cultural” resistance in the UK to the tax take being higher than 40% of GDP.
Inheritance tax was considered unfair as it is too easy for the rich to avoid paying it because they are the ones who can afford to give away assets. The rest of us need our house and our pension and have few other assets. Very few other countries have similar inheritance taxes.
Having a wealth tax instead of inheritance tax was considered impractical – if you have assets you do not necessarily have the cash to pay the tax on them – we do already have some wealth taxes such as council tax and stamp duties.
One suggestion was instead a gift tax. This would tax the recipient of a gift at their marginal income tax rate. It was thought this would be simple to administer and would be imposing tax at a point when value was changing hands.
The final consensus was that there in order to fund the increased spending income tax would have to be raised and this would have to be borne by a wider group than just the highest earners.
For more information about the issues raised in this article please contact Emma Satterly on 01223 461155 or click here
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