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UK Should Require More Tax From Self-Employed: OECD

by Amanda Banks,, London

18 October 2017

The UK Government should revive its abandoned plan to increase National Insurance contributions (social security tax) for the self-employed, says the OECD in a new report.

The measure had been controversial due to the so-called "triple tax lock" pledge in 2011 from the ruling Conservative Party that value-added tax, national insurance, or income tax would not rise during the life of that parliament.

In March, UK Chancellor Philip Hammond was forced into an embarrassing u-turn on abolishing class 2 national insurance contributions and subjecting self-employed persons to class 4 national insurance contributions, which would rise from 2018.

"To improve fairness in tax policy and reduce risks for the financing of the social insurance system, the authorities should gradually reduce the gap between national income contributions for self-employed and employees," the OECD said.

Elsewhere the report called for the Government to further devolve powers over council tax on residential property, and the business rate tax on commercial property to local authorities.

"Further decentralization of these taxes – as started by the New Homes Bonus initiative – could provide more incentives for approving real estate developments," it said. "If carried out successfully, such decentralization could broaden the local tax base by creating a virtuous circle between greater investments in infrastructure and skills, and higher attractiveness of businesses."

Meanwhile, the OECD also said that the UK could address pollution by increasing environment-related taxation in line with other EU member states.

The report also warned that the country faces "serious economic uncertainties" due to the decision to leave the European Union, adding that "maintaining the closest economic relationship with the European Union will be absolutely key, for the trade of goods and services as well as the movement of labor."

TAGS: tax | insurance | Organisation for Economic Co-operation and Development (OECD) | insurance tax | United Kingdom | tax reform

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