Not only are they tying their hands by promising not to increase the rates of income tax or VAT or to increase corporation tax, capital gains tax, stamp duty land tax or any tax on pension saving. Not only are they promising to keep some of the silliest tax reliefs we have, such as business asset disposal relief in capital gains tax and business & agricultural property reliefs in inheritance tax. They are promising not to make essential and urgent reforms that should be at the top of any serious party’s to-do list. Council tax in England is based on valuations that are already 33 years out of date, with the majority of properties now effectively in the wrong band; not revaluing would entrench the unfairness in a system which must eventually be unsustainable. And with petrol and diesel cars due to disappear from the roads – and fuel duty revenues with them – we desperately need a plan for how to tax electric vehicles in the long run; Conservative ministers have repeatedly said they want to replace the lost fuel duty revenue with other taxes on motoring, but in promising not to introduce per-mile road pricing they are now ruling out the best option.
These are clearly politically driven pledges. They are not the promises of a party that is serious about reforming the tax system in ways that would boost growth or remove inequities. It is perfectly reasonable for a party to want to cut taxes rather than increase them. But the pledges in this manifesto would also rule out vast swathes of sensible structural reform of the tax system. The Conservatives have missed opportunities to reform tax in the last 14 years. They are making clear that they would continue that trend by essentially preserving the current structure of the tax system in aspic, even as the world moves on around it. It is hard to believe that the way we currently levy taxes is the best we can do.
Stuart Adam, Senior Economist at IFS
Landlord CGT exemption: ‘a gimmick that could badly backfire’
There is a serious problem with the proposal. It would be amazingly valuable to some people – there are individual landlords who potentially would have tens of millions of pounds of gains. There is much recent history of incompetent or unscrupulous tax advisers selling avoidance schemes to landlords – we would be confident that schemes would be marketed abusing this relief. It wouldn’t take much for the cost of that abuse to greatly exceed the £20m intended cost.
This comes back to a point we’ve often made: tax reliefs are inherently dangerous – policing the margins of reliefs is difficult, and people will inevitably try to abuse them. It’s much better to have a wide base (i.e. few reliefs) and a lower base.
In our view, this is a gimmick which will benefit very few people and could badly backfire.
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Views on the Conservatives’ proposals
‘The worst thing is what they are ruling out’
Not only are they tying their hands by promising not to increase the rates of income tax or VAT or to increase corporation tax, capital gains tax, stamp duty land tax or any tax on pension saving. Not only are they promising to keep some of the silliest tax reliefs we have, such as business asset disposal relief in capital gains tax and business & agricultural property reliefs in inheritance tax. They are promising not to make essential and urgent reforms that should be at the top of any serious party’s to-do list. Council tax in England is based on valuations that are already 33 years out of date, with the majority of properties now effectively in the wrong band; not revaluing would entrench the unfairness in a system which must eventually be unsustainable. And with petrol and diesel cars due to disappear from the roads – and fuel duty revenues with them – we desperately need a plan for how to tax electric vehicles in the long run; Conservative ministers have repeatedly said they want to replace the lost fuel duty revenue with other taxes on motoring, but in promising not to introduce per-mile road pricing they are now ruling out the best option.
These are clearly politically driven pledges. They are not the promises of a party that is serious about reforming the tax system in ways that would boost growth or remove inequities. It is perfectly reasonable for a party to want to cut taxes rather than increase them. But the pledges in this manifesto would also rule out vast swathes of sensible structural reform of the tax system. The Conservatives have missed opportunities to reform tax in the last 14 years. They are making clear that they would continue that trend by essentially preserving the current structure of the tax system in aspic, even as the world moves on around it. It is hard to believe that the way we currently levy taxes is the best we can do.
Stuart Adam, Senior Economist at IFS
Landlord CGT exemption: ‘a gimmick that could badly backfire’
There is a serious problem with the proposal. It would be amazingly valuable to some people – there are individual landlords who potentially would have tens of millions of pounds of gains. There is much recent history of incompetent or unscrupulous tax advisers selling avoidance schemes to landlords – we would be confident that schemes would be marketed abusing this relief. It wouldn’t take much for the cost of that abuse to greatly exceed the £20m intended cost.
This comes back to a point we’ve often made: tax reliefs are inherently dangerous – policing the margins of reliefs is difficult, and people will inevitably try to abuse them. It’s much better to have a wide base (i.e. few reliefs) and a lower base.
In our view, this is a gimmick which will benefit very few people and could badly backfire.
