There are all sorts of weird disparities in our tax system. Why should paying yourself through a company instead of being paid directly by your employer change what tax rate you pay? Why should debt get a better deal than equity, or share buybacks a better deal than dividends?
The reason all these quirks, which are both unfair and opportunities for the crafty to dodge their taxes, exist is because the tax system has been broken by politicians trying to raise more and more revenue, and hide tax rates from voters who would rather keep more of their own money. The result was neatly summed up by George Osborne in 2010 - we now have a spaghetti bowl of taxes. It will take serious reform to untangle them.
That's why the TPA set up the 2020 Tax Commission with the IoD 18 months ago. Instead of just calling for lower taxes to boost economic growth - important in itself - our objective was to design a better, simpler and fairer tax system for the UK. And today, we have published our final report.
The recommendations are radical, but practical.
We propose implementing the Single Income Tax. The result would be a far simpler system that would tax distributed income, from capital or labour, just once at a proportional rate of 30%. This would kick in after a personal allowance of £10,000. We would replace corporation tax and capital gains tax with a tax on flows of income. National Insurance, a wasteful fiction that masks the fact the basic rate is really 40%, would be rolled into Income Tax and abolished.
These reforms would be fairer too. If you earn twice as much, you pay twice as much. No more opportunities for everyone from mayoral candidates to Department of Health executives to pay less by taking their earnings in a certain form. Those opportunities would be closed off with a comprehensive and uniform tax on all income.
Other 2020 Tax Commission proposals would help to make things fairer. Taxes like Stamp Duty Land Tax are unfair on young families looking to buy their first home. It is an ugly tax that prevents people from moving to take new opportunities and the Mirrlees Review organised by the Institute for Fiscal Studies also argued it should go.
To help achieve this, the 2020 Tax Commission recommends that spending should be brought down to 33% of national income. That is about the same as the share spent by the Government in Australia, would leave more in people's pockets and wouldn't have to put too much strain on the public sector with strong economic growth, so the government took a smaller share of a larger pie.
To get out of our slump, we need to think big. It's no good lowering or simplifying taxes rates in one area, only to increase or complicate them elsewhere. Not only will that prolong our economic malaise, it's also tends to produce unfair results. Radical reform of the tax system is needed and we can get a jump on our competitors if we act now.