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Tax promises rain down from Tory hopefuls

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Several of the contenders for leadership of the Conservative party have promised significant tax changes if elected. Boris Johnson’s proposal to raise the income tax higher rate threshold from £50,000 to £80,000, offset by corresponding increases in the NICs upper earnings limit, has received the most attention.

The CIOT in Scotland has pointed out how, with decisions over NICs reserved to the UK Parliament in Westminster, many Scottish taxpayers could end up paying significantly more than their counterparts elsewhere in the UK.

Alexander Garden, chair of the CIOT's Scottish technical committee, said: ‘Taxpayers in Scotland who pay income tax at the rates and bands decided by the Scottish Parliament for earned income would not see any of the benefits of the proposal to increase the higher rate threshold from £50,000 to £80,000, but they would be impacted by changes to NICs’.

Against this, David Phillips, associate director at the Institute for Fiscal Studies, argues that any such reduction in tax bills and revenues in the rest of the UK would, by virtue of Scotland’s fiscal framework, translate into higher block grant funding for the Scottish government, allowing it to balance the UK tax changes for Scottish taxpayers if it so chose.

At the other end of the scale, Dominic Raab has said he would cut the basic rate of income tax from 20% to 15% over five years and raise the NICs primary threshold to £12,500.

Michael Gove would scrap VAT and replace it with a ‘lower, simpler’ sales tax. The director of the Institute for Fiscal Studies, Paul Johnson, reminds us that VAT in the UK raises nearly £140bn a year. Paul Johnson described Gove’s proposal as ‘the biggest, riskiest and most disruptive change in the tax system in at least half a century’, adding that every OECD country bar the US has been moving away from sales taxes in favour of VAT in recent decades.

Jeremy Hunt intends to cut corporation tax, aiming to make the UK’s business taxes the ‘lowest in Europe’.

More broadly, Sajid Javid would seek a ‘radical overhaul’ of small business taxes, with the aim of achieving ‘simpler, flatter, lower taxes’.

The Institute for Government has produced an ‘explainer’, looking at what each candidate has set out in various policy areas, including Brexit (bit.ly/2X3abto).

Issue: 1447
Categories: News
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