According to the Commission’s final report, there are six measures necessary in order to introduce the new form of taxation:
- Taxes should be cut to 33% of national income;
- Marginal tax rates should not exceed 30%, and the personal allowance should rise to £10,000;
- Taxes on capital and labour income disguised as business taxes should be abolished, and replaced with a tax on distributed income;
- Transaction, wealth and inheritance taxes should be abolished;
- Other consumption taxes need to stay for now, but transport taxes should be cut;
- Local authorities should raise half of their spending power from local taxes.
Allister Heath, chairman of the 2020 Tax Commission, 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.”
The proposals would result in substantial tax cuts for households: a two earner household with an income of around £28,000 would receive a tax cut of around £3,400, for example. They are also believed to have the potential to provide a boost to economic growth, with a possible increase in GDP after 15 years of 8.4%.
According to the report, Income Tax and employees’ and employers’ National Insurance would be merged into a single tax on labour income; Corporation Tax and Capital Gains Tax should be replaced with a single tax on capital income at a rate of 30%; Stamp Duty and Inheritance Tax would be abolished, together with Ait Passenger Duty (while Fuel Duty would be cut by 5p).
Matthew Elliott, commissioner and chief executive of the TaxPayers’ Alliance, commented: “The tax system has to be fair, and seen to be fair. Our current complicated tax code where income is too often either taxed repeatedly or not at all doesn’t pass that test. The Single Income Tax is a serious plan for a tax system that can restore Britain’s economic fortunes and leave more of their money in taxpayers’ pockets.”