The Institute for Government publishes report: “Overcoming the barriers to tax reform”

17 April 2020

The Institute for Government – a thinktank which aims to help to make government more effective – has published a report which discusses the main barriers that stand in the way of reforming the tax system and how the government could overcome them.

The report states that the UK tax system would benefit from an overhaul but that this has been avoided historically by previous governments, due to fear of public resistance. The coronavirus outbreak will serve to highlight existing issues within the system, but the government should seize this rare opportunity to make changes to the UK tax system as the pandemic may bring public support for tax reform.

Raising revenue seems an increasingly difficult task for government, due to the increase in number of digital businesses which are harder to tax, and the boost in the number of self-employed, who have previously been taxed less than employees. In addition to this, the ageing population in the UK and their increased reliance on health and social care means that there is more pressure on public spending, which requires tax rises unless the level of service offered is reduced. Prior to the coronavirus crisis, there was no public desire to scale back public services, and, as a result of COVID-19, the public are even more likely to support higher funding levels for the NHS.

The coronavirus has added even more additional pressure, as the measures implemented by the government to support employers and employees through the outbreak will add billions of pounds to public debt, which will need to be financed. The aftermath could provide the chance to address longstanding issues and improve the way in which tax is raised and to move to a higher tax system. This requires a major tax reform, and the report has set out the main barriers that prevent reform of the tax system and the solutions which will serve to overcome those barriers.

The recommendations set out in the report are are as follows:

  • Clear objectives for the tax system must be set by the Prime minister and chancellor
  • A tax commission should be established by the government
  • The Treasury needs to raise public understanding of the requirement for tax reform
  • HMRC and the Treasury need to build a stronger evidence base for tax reform
  • More time needs to be spent looking at the tax system by the Treasury Select Committee (TSC)
  • Tax reform measures need to be carefully packaged

Read the report in its entirety here.

The information in this article is accurate at the time of publication. For all the latest information, news and resources on how the COVID-19 pandemic is affecting payroll professions, visit our Coronavirus hub.