The idea
1. The tax system is now unfit for its purpose of raising revenue fairly and efficiently. The code has double in size and complexity in the last 13 years.
2. It is so unwieldly that it is impossible to harmonise with the benefits and welfare system (although Frank Field MP is trying to do so).
3. The way forward is to strip down to essentials, remove the loopholes for special interest groups, and make a bonfire of the exceptions and perks.
4. We need to raise the same revenue (about 40% of GDP) more equitably,with 4 basic taxes, with virtually flat rates:
A. Income tax . To start at £12,000, and be in two bands of 20 and 40%, the top band starting at £50,000. Everyone to pay it (including non-doms). To apply to world wide earnings.
B. Capital Gains and Business Tax; First £12,000 to be tax free, then all gains taxed at 20%. This includes multinationals like BP, HSBC, and Berkshire Hathaway. To apply to world-wide earnings.
C. Sales Tax (VAT); to be at 20 or 22%, on all goods and services except food. (Alcohol and tobacco to be at higher rates, as now).
D. Property (land) tax, to include all 'real property', such as farmland, houses, and estates, whether held in the UK or abroad. To be levied on the actual value, at 1 % annually. To apply to businesses too.
We can remove taxes on inheritance, local property rates, business rates, 'special levies', luxury taxes, and hundreds more.
Once the tax system is simplified, social benefits (state pensions, child benefit, unemployment help) can be structured accordingly.
Why is it important?
Simplicity is a virtue in government. Harmonising taxes and benefites is the key to a fair welfare state, at an affordable cost. Transparency in taxation is a duty of good government; and paying tax is the duty of citizens who enjoy their state's protection. At the moment we are badly adrift. This proposal will strenghten all our futures.