The Institute for Public Policy Research said Chancellor Rishi Sunak’s budget needs to focus on capital gains, corporation, wealth and land taxes.
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The Chancellor should use the budget for a major overhaul of four key tax areas to avoid stifling any recovery after the pandemic, according to a new think tank report.
The Institute for Public Policy Research (IPPR) said Chancellor Rishi Sunak could raise £55 billion for the Treasury by reforming capital gains tax, corporation tax, wealth tax and land value taxes.
Researchers also argue that raising certain taxes now could ensure the recovery is more balanced, more sustainable, and could prevent inequality from escalating further.
Economists and politicians have said any tax rises to pay down the huge budget deficit created from the Covid-19 pandemic should be held off until the expected recovery is already under way, but many are calling for reforms.
The IPPR said overhauls would have minimal impact on the speed of the recovery, if they were accompanied by a major stimulus package.
Last week the group said the Chancellor needed to spend £190 billion to stimulate the economy sufficiently after the lockdown restrictions end to fully restore jobs, investment and public services.
The researchers argue that tax reforms with a limited short-term impact on growth should be prioritised this year, starting in next week’s budget.
They added that the Chancellor must protect the incomes of those already hardest hit by the crisis; make the tax system more efficient by reducing unfair advantages, biases and loopholes; have low impact on investment and spending needed to boost the recovery; and future proof the economy with green tax incentives.
The report said bringing capital gains tax levels in line with the same tax levels as income tax would generate an extra £33 billion a year.
Reversing cuts in corporation tax, bringing the rate back to 24%, could raise £13 billion a year and would only impact companies making profits, the IPPR added.
And reforming wealth taxes by replacing inheritance taxes with a lifetime gifts tax, would be fairer and more efficient, the report found. It could raise an extra £9 billion a year, researchers said.
Finally, the report said land and property taxes required a major overhaul because rising property prices were not reflective of the economy. The Treasury has already committed to a major review of business rates, although any decision has been delayed until later this year.
Non-commercial property council tax and stamp duty should also be replaced with a proportional property tax based on current-day values, the report added.
Carsten Jung, IPPR senior economist, said: “We must move away from the binary debate on tax rises and the recovery. The fact is, some taxes, like corporation tax and capital taxes, can be raised now without slowing the recovery, as long as they are accompanied by a big stimulus.”