An influential think tank has urged Rachel Reeves to resist ‘simple’ tax rises, including National Insurance, and instead urges a reform of council tax.
The Institute of Fiscal Studies says: “Increasing taxes on returns to capital – such as rental income, dividend income, interest income, self-employment profits or capital gains – simply raising tax rates without reform would do more economic damage than is necessary”.
Instead it suggests that what it calls “proper reform” of property taxes would reduce disincentive effects on investment and therefore the unnecessary drag that they have on growth.
It goes on to say: ”Property taxation is an area in desperate need of reform. Revenue-raising within the existing system is possible, for example by increasing council tax across the board or for high-band properties – though this extra revenue would accrue to local authorities, rather than the exchequer, in the first instance.
“It would be much better to raise any additional revenue from a reformed system.
“A good end goal would be a reformed council tax (or a new recurrent property tax) that was proportional to up-to-date property values in place of the current council tax (which in England is still ludicrously based on property values as of 1991) and stamp duty land tax on housing (which discourages relocation and upsizing/downsizing, and drags on growth).”
IFS director Helen Miller says Chancellor Rachel Reeves’s last Budget was “full of tax increases”, leaving “only losers”, adding that “reform means you could have some winners”.
She continues: “If you do a reform approach, you can say you’re doing something for a principled reason, and make the system better, make us all better off, ultimately. At least you’ve got some good news to go alongside the inevitable upset from raised taxes.”
This article is taken from Landlord Today