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SOME FACTS ABOUT CURRENT LEVELS OF TAXATION A recent report from the Organisation for Economic Co-operation and Development (O.E.C.D.) stated that last year the proportion of the GDP taken in taxes rose from 36% to 37.5%, which equates to an extra £310 per annum for every adult in the UK and represents the biggest increase for any European country. Taxes in the UK are now higher than the industrial countries' average and are considerably above those in Germany, Japan and the US, which will result in many middle class households seeing half their incomes disappear in direct and indirect taxes. Since 1997 the Chancellor has been incredibly adept at raising Treasury tax receipts without appearing to actually raise taxes. The result of imposing 80 stealth taxes in this period coupled with the effects of 'fiscal drag' on Income Tax, Inheritance Tax and Stamp Duty, has resulted in increasing the overall tax receipts from £270 billion to the 2006/7 estimated level of £516 billion. According to the Office for National Statistics, the number of taxpayers paying higher rate tax has risen to 3.5 million and it is estimated that by the end of this parliament, the figure will reach 4 million. The full impact of these tax increases has not been obvious in personal budgets due to low interest rates and low mortgage repayments. However, recently it has been estimated by financial experts that rising levels of taxation coupled with rising interest rates, energy bills and Council taxes accompanied by only modest salary increases has resulted in the average family being 10% worse off than four years ago and upwards of two and a quarter million will experience some financial difficulty in the immediate future. The Bank of England stated that in the UK the personal sector is too highly taxed and this is having an adverse effect on consumption. Council Tax has become another form of stealth tax open to abuse by the imposition of often unfunded Central Government burdens on Local Government, e.g., housing for immigrants. The CBI has warned that current Corporate taxes are unsustainable and that many of our largest companies may well seek to relocate their Head Offices to countries with more favourable tax regimes. The UK Corporation tax rates are currently 5% above the European average and to discourage any such relocation, Popular Alliance would lower UK Corporate taxes and simplify their application. The present Government's economic policies have entrenched public expenditure and other forms of state dependency across the country to such a degree that it is extremely unlikely that other parties will 'grasp the nettle' and address the urgent need to reverse this dismal state of affairs. WHAT MEASURES WOULD POPULAR ALLIANCE TAKE WITH REGARD TO TAXATION? Initially, the policy of Popular Alliance is to ease the burden of direct taxes on all taxpayers and with this is mind, our policy with regard to individual taxes is set out below. Income Tax Very positive steps would be taken by Popular Alliance to offset the effects of 'fiscal drag' and with this in mind tax thresholds for income tax would initially be raised and subsequently linked to inflation, with the object of completely removing lower paid workers from the tax system. Inheritance Tax A new threshold of £450,000 would be established and thereafter to be linked to house price inflation. Stamp Duty Stamp Duty will be held at current levels. Properties over £500,000 to be reduced to 3% maximum. National Insurance Tax National Insurance contributions will be reviewed and capped. Married Persons Allowance The Married Persons' Allowance would be reinstated for all married couples at a rate of £7,000/annum with a restriction of 10%. This would result in all married couples receiving £700/annum reduction in their income tax liability. The 10% would be subject to a periodic review. Council Tax We will reset current levels of Council Tax and future increases will be linked to the rate of inflation or less. Unfunded burdens from central government would not be imposed in the future. Corporation Tax Popular Alliance will reduce this to the following rates:- Taxable Profits Tax First £15,000 None Next £40,000 14% Next £250,000 14% Next £1,200,000 25% Over £1,500,000 25% This will give a much needed boost to manufacturing and industry, particularly to small businesses. It should give an incentive to expand and create more jobs. Capital Gains Tax Capital Gains tax is a politically motivated tax and for the amount it produces does not warrant the cost of collection. It would therefore be abolished. Popular Alliance's policies will stimulate high productivity through the lowering of taxes and the diverting of valuable resources away from the Public Sector to the wealth creating private sector thereby giving to industry and individuals alike greater freedom in decision making and choice, and weakening the influence of the 'dead hand of government'. As indicated in the Public Finance Policy, these reforms will be financed by way of a root and branch investigation into Government waste, currently estimated at £80 - £100 billion per annum, coupled with a reduction of the existing welfare state as set out above. Regional Assemblies would be abolished. However, public expenditure will be reviewed and where necessary increased in those areas where it is deemed to be essential to the wellbeing of the nation. Another area of saving will arise as a result of withdrawal from the European Union - the outflow of tax receipts being diminished by an estimated £35 million PER DAY. Any surplus revenue over and above immediate requirements would be applied to the reduction and ultimate elimination of existing Budget deficits. Flat Rate Tax Recently, discussion has taken place in the financial circles and some political parties in connection with the feasibility of introducing a system of Flat Rate Taxation to replace the UK’S current system. Advantages Rather than the present system of progressive rates of tax allowances and reliefs , a flat rate system would be based on a single rate of personnel Income Tax and therefore would be much simpler for the Tax Payer to understand , and for the Revenue to administer. Depending on the level at which the flat rate is fixed, some Taxpayers would gain (ie, those currently taxed at 40%) whilst standard rate Taxpayers may not experience any appreciable gain. Disadvantages However, any tax gains to the Taxpayer may well result in receipts from Income Tax falling and as such a system would need to be revenue neutral, and any shortfall would need to be recouped from Business Taxation. This could mean that some of the main features of the Corporation Tax system would need to be removed thus moving the UK out of line (Tax Wise) with our over seas competitors. The single rate of Personal Income Tax mentioned above is pivotal to the system, and means that Income is Taxed once only at the time of being earned. This then raises the question of the continued existence of other Taxes such as, Capital Gains Tax and Inheritance Tax as the monies on which these Taxes are levied have already been Taxed once, under a Flat Rate system. Whether the removal of such long established Taxes and Incentives like ISA’S would be possible is open to question, but in any event the Treasury would need to make a definitive policy in this connection. Conclusion It may be that the introduction of the Flat Rate Tax would be very difficult for a highly developed and complex economy such as ours . It may well involve the reforming and in some cases the dismantling of established economic structures. This would no doubt give rise to strong opposition from those quarters likely to be disadvantaged by its introduction. On present evidence the POPULAR ALLIANCE has no intention of introducing a Flat Rate Tax. If you have any views on our tax policy, or the flat tax system, please feel free to send us your input to the following email
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Popular Alliance – A Fresh Light On Politics
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