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Tax Rate Should Be Simplified To Single 30% Rate To Boost Growth, Report Says

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TAXPAYERS ALLIANCE REPORT TAX SIMPLE
The major study demands simplification of the UK's tax system, including the abolition of national insurance and stamp duty. | PA

A single 30% rate of income tax and further public spending cuts are needed to boost growth, according to a report backed by a campaign group and business leaders.

The major study demands simplification of the UK's tax system, including the abolition of national insurance and stamp duty.

The report, by the 2020 Tax Commission, claims the changes would result in a £3,400 tax cut for a two-earner household with an income of around £28,000 and could lead to an 8.4% increase in the UK's gross domestic product after 15 years.

The commission, a joint project between the TaxPayers' Alliance and Institute of Directors, calls for 30% tax rates on income and capital.

Under the plans national insurance contributions would be scrapped, with a single 30% rate of tax on income and a £10,000 personal allowance.

Corporation tax and capital gains tax would be replaced with a 30% tax on dividends, interest and rent.

Inheritance tax and stamp taxes on shares would be scrapped along with air passenger duty, while fuel duty would be cut by 5p under the proposals.

single income tax

Taxation would be limited to a third of national income, as would public spending - meaning an extension until 2020 of cuts in government expenditure.

Councils would see their grants from central government cut but would be given new powers to impose local income and sales taxes.

The proposal to shift to the single income tax would increase the budget deficit by £49.1 billion in the first year if the changes were not phased in or if there were no further cuts to public spending.

But the commission predicts that the boost to the economy would result in a £35 billion fall in annual borrowing after 15 years.

Allister Heath, chairman of the 2020 Tax Commission and editor of City A.M., said: "It is time for Britain to make a vital choice between tweaking the status quo and letting our economy continue to be crippled by complex and punitive taxes, and drastically changing course with a radical but realistic plan for a tax system fit for the 21st century.

"The 2020 Tax Commission has set out that plan and would ensure that income is taxed once at a single, much more reasonable rate. It could create the conditions to establish the UK as a global trading hub, generating renewed prosperity for all those who live and work here.

"Politicians who are serious about Britain's future need to take it up."

Matthew Elliott, chief executive of the TaxPayers' Alliance, said the government's priority should be to "ease the pressure" on families: "Tax reform is essential to make that possible."

Graeme Leach, director of policy at the Institute of Directors, said: "This is a radical and practical plan for reforming our tax system to make it fairer and better for the economy.

"Fiddling with the system causes more complexity and has little benefit to growth - this proposal would put a rocket under economic confidence.

"This is a real opportunity to make life easier for people, get more money on the high street and give Britain a tax system which is right in principle and works in practice.

"We need radical action to kickstart the economy, and this is a comprehensive way to do that in one go."

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