Tax and Fiscal Policy

How Britain Could Scrap Income Tax


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In the Media

Chris Snowdon writes in the Spectator

Lifestyle Economics

IEA research referenced in the Telegraph

The Institute of Economic Affairs 2016 paper was referenced in a Telegraph article on how to radically reform the tax system.

The article said:

“When we think of tax, the first one that comes to mind is probably the chunk that evaporates from our pay cheques…

“Yet there are ways to radically change income tax without abolishing it. In a research paper from 2016, the Institute of Economic Affairs (IEA) proposed a bonfire of more than 20 taxes, and the introduction of a flat 15pc rate of income tax above a £10,000 tax-free threshold.

“Proponents argue that a flat rate of income tax would make the tax code more transparent, reducing the number of loopholes and eliminating cliff edges.

Estonia, for instance, applies a flat 20pc tax rate to income. Its tax system is the most competitive in the world, according to the OECD, because it is efficient and simple to understand, with a broad tax base.

“The trade-off is that a flat rate system would bring in less revenue for the Treasury. Flat rates are also regressive, meaning the poor are hit hardest. Some sort of redistribution would be needed.

“The IEA authors write: “Progressivity could be achieved by having a lump sum transfer to all people (which would be progressive because it would be a bigger proportion of income for the poor) and a flat tax rate (which would avoid the problem of rising marginal rates).””

Read the full article here.


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