An overhaul of the UK’s tax system could generate enough government income to reduce public debt significantly.
According to the Keynesian think-tank, Compass, the current tax regime is “regressive and unfair”, and a radical reform could result in £47 billion of extra government revenue.
A paper published by the group targets “imbalances” in the tax system and recommends that the government make priorities of modernising public services and creating a green infrastructure rather than of spending cuts.
The report said: “Britain is not bankrupt. British taxes are not, historically, too high – but they are structurally regressive and unfair.”
While tax reforms could play a major part in correcting the UK’s structural deficit of £45 billion, as forecast by the Institute for Fiscal Studies, broad cuts in public spending, on the other hand, could push the economy into the stagnatory mire in Japan found itself, Compass argued.
Specifically, the paper recommended a 50p income tax band for gross incomes above £100,000, uncapping national insurance contributions so that they are paid at 11 per cent all the way up the income scale, and minimum tax rates of 40 per cent and 50 pr cent on incomes above £100,000 and £150,000 respectively.