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UK Tax Freeze Impractical, Think Tank Says

by Jason Gorringe, Tax-News.com, London

02 May 2017


UK politicians should avoid including pledges to freeze tax in their manifestos ahead of the election in June, the Institute for Fiscal Studies has said.

"Regardless of whether one wants taxes overall to be cut, this is a bad policy and should not be repeated in any of the upcoming manifestos," the IFS said.

In a briefing note, the IFS argued that with successive governments under increasing pressure to maintain revenues, tax giveaways on income, National Insurance (NI) and value-added tax (VAT) tend to be either dropped shortly after an election or covered by tax increases in other areas such as dividends, pensions, and insurance.

It said that tax freezes prevent politicians from making key tax reforms when new fiscal pressures are identified. One such example highlighted in the report was Chancellor Philip Hammond's decision to ditch Budget plans for an increase in NI contributions for the growing self-employed population. This was following objections from within the Conservative Party that the policy breached a 2015 election pledge to not raise any of the three major taxes.

Meanwhile, the British Chambers of Commerce (BCC) has urged politicians to commit to not introducing any new upfront taxes on businesses for the duration of the next Parliament in light of Brexit negotiations.

"Westminster must stop and reverse the relentless increases in the up-front cost of doing business in Britain and give firms the confidence to drive investment, job growth, and exports through the Brexit transition and beyond," said BCC Director General Adam Marshall.

The Conservative and Labour parties have both said that they would not increase VAT if elected but neither party has committed to freezing income tax or NI.

TAGS: Insurance | tax | investment | business | pensions | value added tax (VAT) | insurance | United Kingdom | dividends | tax reform | individual income tax | Tax

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