A report examined the impact of regressive indirect taxation, including 'sin' taxes – on such items as alcohol, tobacco, and gaming – and green energy subsidies. It noted the disproportional impact on low-income households and called for a reduction in levels of taxation.
Source: Christopher Snowdon, Aggressively Regressive: The 'sin taxes' that make the poor poorer, Institute of Economic Affairs
A paper examined tax policies in developed (OECD) countries in the aftermath of the global economic crisis.
Source: Pierre LeBlan, Stephen Matthews, and Kirsti Mellbye, The Tax Policy Landscape Five Years after the Crisis, Taxation Working Paper 17, Organisation for Economic Co-operation and Development
A think-tank report said that because marriage offered 'unparalleled stability' for families and children, it was right to recognize it through a transferable tax allowance. It was also essential that this recognition was meaningful: setting the allowance too low risked nullifying its potential to support low-income married couples and could undermine the whole policy. The report proposed that one-earner married families with small children should get a tax cut worth more than £30 a month, instead of the much smaller allowance expected to be introduced by the coalition government.
Source: Supporting Families, Strengthening Marriage: A plan for a meaningful transferable tax allowance for married couples, Centre for Social Justice
A think-tank report said that there was a significant discrepancy between official figures for the number of lone-parent households in England and Wales and the number of people who were claiming lone-parent tax credits. It said that at least 240,000 couples with children were pretending to live apart in order to claim the credits. The report called for the introduction of an additional child benefit for married couples with a child under the age of 3: this would counteract the 'couple penalty' that meant that couples with children were up to £7,100 better off if they were not married and pretended to live apart.
Source: Harry Benson, A Marriage Tax Break Must Counter the Crazy Incentive for Parents to 'Pretend to Live Apart', Marriage Foundation
A new book examined the United Kingdom government's complicity in tax avoidance, and how the UK had became a global tax haven that served the interests of 'super wealthy' people.
Source: Richard Brooks, The Great Tax Robbery: How Britain became a tax haven for fat cats and big business, Oneworld Books
A report examined how tax credits customers communicated, and would prefer to communicate, with HM Revenue and Customs; the support that customers needed with their claim, where they accessed that support, and where they would prefer to access it; and customers' use of computers and the internet (against the background of the forthcoming transition to largely digital channels under universal credit).
Source: Deborah Reynolds, Channels of Communication: Usage and preferences among tax credits customers – Findings from the panel study of tax credits and child benefit customers 2008-2012, Research Report 273, HM Revenue & Customs
A report examined the impact of independent taxation 25 years after its introduction. It said that the benefits of independent taxation had been 'greatly undermined' by the failure to include transferable allowances, which had resulted in families bearing a greater share of the income burden than before the changes. This problem had been compounded by recent changes to child benefit: these pushed some one-earner couple families into the lower half of the income distribution, whereas single people or two-earner families on the same income were unaffected. The new universal credit would have the benefit of recognizing a second parent, reducing the 'couple penalty': but it would not compensate much better than tax credits for the failure of the income tax system to take account of marriage or family responsibilities.
Source: Don Draper and Leonard Beighton, Independent Taxation – 25 years on: Does it meet todays needs?, CARE
The Prime Minister (David Cameron MP) announced – in an article in the Daily Mail newspaper – that a transferable tax allowance of £1,000 per year would be introduced from 2015 for married couples and civil (same-sex) partners paying the standard rate of income tax. The Conservative Party's coalition partner, the Liberal Democrats, described the proposal as 'a tax cut for some paid for by everyone else' and the 'wrong priority'.
Source: Daily Mail, 27 September 2013 | Press release 28 September 2013, Liberal Democrats
Links: Daily Mail article | HMT press release | CARE press release | Gingerbread press release | IFS press release | Liberal Democrats press release | Marriage Foundation press release | BBC report | Daily Mail report | Guardian report (1) | Guardian report (2) | Telegraph report | New Statesman report (1) | New Statesman report (2) | Public Finance report
HM Revenue & Customs published its annual report for 2012-13.
Source: Annual Report and Accounts 2012-13, HC 1314, HM Revenue & Customs, TSO
A report said that the government needed to make it easier for vulnerable groups to access support and advice about tax repayments. Poor service and complexity had resulted in many disadvantaged taxpayers turning to unaffiliated refund organizations rather than HM Revenue and Customs as their first port of call in dealing with tax repayment.
Source: The Tax Repayment System and Tax Refund Organisations: A call for action, Low Incomes Tax Reform Group (Chartered Institute of Taxation)
The coalition government published the first six reports arising from a review of the 'balance of competences' between the United Kingdom and European Union. The reports included those relating to health issues and taxation.
Source: Review of the Balance of Competences between the United Kingdom and the European Union: Health, Department of Health | Review of the Balance of Competences between the United Kingdom and the European Union: Taxation, HM Treasury
An article examined the idea of progressive taxation and its justification (especially the 'ability-to-pay' principle) against the background of the financial crisis in Europe. Progressive taxation could be justified in the light of the three principles of need, merit, and equality even more so in the situation of a crisis that undermined decent living conditions for millions. The principle of need had to be given priority even if doing so violated the principles of equality and desert.
Source: Helmut Gaisbauer, Gottfried Schweiger, and Clemens Sedmak, 'Ethical obligations of wealthy people: progressive taxation and the financial crisis', Ethics and Social Welfare, Volume 7 Issue 2
A think-tank report said that the 'shadow' economy accounted for approximately 10 per cent of national income, or almost £150 billion. If this economic activity were properly taxed, the government would receive almost £50 billion in new revenue. The report said that the government should encourage people to move into the legitimate market by lowering taxes and granting amnesty from back taxes to those looking to formalize their business arrangements.
Source: Friedrich Schneider and Colin Williams, The Shadow Economy, Institute of Economic Affairs
A think-tank report called for 'far-reaching, comprehensive and multidimensional' reforms aimed at making the tax system fairer. Taxes on work would be significantly reduced, while the treatment of different types of earnings would be brought together into a common unitary tax regime: national insurance would be abolished. Companies would pay more in general corporation tax. A new tax would be levied on all holders of wealth, including both individual and corporate entities.
Source: Chris Nicholas, Fairer Tax for a Better Economy, Institute for Public Policy Research
A think-tank report called for the introduction of a land value tax, replacing business rates and stamp duty. The tax would be levied on all land except for that underneath ordinary people's homes, and would be targeted at unproductive wealth and speculation. It could help to boost housebuilding and economic revival. It would incentivize those who traded in, and 'sat on', empty land to develop it for the common good; and it would mean that the costs and proceeds of investment were more fairly shared.
Source: Andy Hull, In Land Revenue: The case for a land value tax in the UK, Centre for Labour and Social Studies
A report by a committee of MPs said that HM Revenue and Customs would achieve less than half the projected possible savings from reducing fraud and error in the payment of tax credits, resulting in a revenue shortfall of £5 billion.
Source: HM Revenue & Customs: Tax Credits Error and Fraud, Fourth Report (Session 201314), HC 135, House of Commons Public Accounts Select Committee, TSO
A think-tank report examined how tax cuts would interact with universal credit, and highlighted how little low-to-middle income working households would keep from a higher personal allowance or a 10p tax rate under universal credit. Fixing this problem required universal credit to be adjusted by raising disregards each time the personal allowance was raised, or when a 10p tax band was introduced. This approach would make any tax cut more expensive: but it would also prevent tax cuts from benefiting only better-off families.
Source: Donald Hirsch, Will Future Tax Cuts Reach Struggling Working Households?, Resolution Foundation
A special issue of a journal examined the new release of EUROMOD, the European Union tax-benefit microsimulation model.
Source: International Journal of Microsimulation, Volume 6 Issue 1
Links: Table of contents
Notes: Articles included:
Holly Sutherland and Francesco Figari, 'EUROMOD: the European Union tax-benefit microsimulation model'
Holguer Xavier Jara and Alberto Tumino, 'Tax-benefit systems, income distribution and work incentives in the European Union'
Horacio Levy, Manos Matsaganis, and Holly Sutherland, 'Towards a European Union child basic income? Within and between country effects'
Lidia Ceriani, Carlo Fiorio, and Chiara Gigliarano, 'The importance of choosing the data set for tax-benefit analysis'
A report by a committee of MPs said that large accountancy firms were using knowledge gained from staff seconded to the Treasury to help wealthy clients avoid paying United Kingdom taxes.
Source: Tax Avoidance: The Role of Large Accountancy Firms, Forty-fourth Report (Session 2012-13), HC 870, House of Commons Public Accounts Select Committee, TSO
An article examined whether it was possible to promote marriage by economic incentives. Fiscal incentives were less likely to be successful when operating in isolation; and couples' reasons for marrying suggested a rejection of pragmatism that might make obvious incentives counter-productive.
Source: Rebecca Probert, 'For better or for worse? Encouraging marriage through the tax system', Family Law, March 2013
The coalition government presented its 2013 Budget statement. Forecast economic growth for 2013 was halved, to 0.6 per cent. After excluding special factors, public sector borrowing was expected to fall marginally in 2013-14: but forecasts of public debt were revised sharply upwards, with a peak of 85.6 per cent of national income reached in 2016-17, a year later than previously expected.
The main Budget measures included:
Departmental spending would be cut by a further £1.1 billion in 2013-14 and £1.2 billion in 2014-15 equivalent to a 1 per cent cut for most departments. Schools and health budgets would remain protected, and local government and police allocations that had been set for 2013-14 would not be altered.
Public sector pay increases would be capped at 1 per cent for a further year in 2015-16.
The annual personal income tax allowance would rise to £10,000 from 2014-15, a year earlier than previously proposed. This was a real-terms increase of £240 on the 2013-14 level of £9,440, costing £1.1 billion.
The main rate of corporation tax would be cut by a further 1 percentage point in April 2015, to 20 per cent, at a cost of £865 million per year by 2017-18. Banks would be prevented from benefiting from the cut by an increase in levies.
All businesses and charities would be entitled to a £2,000 reduction in employer's national insurance contributions from April 2014, costing £1.7 billion per year by 2017-18.
A new 'Help to Buy' scheme would offer financial help to home-buyers. Equity loans worth up to 20 per cent of the value of a new-build home would be available to anyone for three years from April 2013. The government would also guarantee up to 15 per cent of mortgages on all properties (both old and new) for three years from January 2014, under an extension of the previous 'NewBuy' guarantee scheme..
The Budget also confirmed plans, announced in advance, for a new system of childcare vouchers, and to bring forward by a year both the introduction of a new flat-rate state pension and a cap on lifetime social care costs.
Source: Budget 2013, HC 1033, HM Treasury, TSO | Impact on Households: Distributional analysis to accompany Budget 2013, HM Treasury
Links: Report | Household impact statement | OBR report | Hansard | HOC research brief | Barnardos press release | BSA press release | CBI press release | Childrens Commissioner press release | Childrens Society press release | CIH press release | Citizens Advice press release | CML press release | CPAG press release | ECP press release | Family Action press release | Fawcett Society press release | Gingerbread press release | HBF press release | LGA press release | LITRG press release | JRF press release | NHF press release | Resolution Foundation press release | Shelter press release | TUC press release | WBG press release | BBC report (1) | BBC report (2) | Community Care report | Daily Mail report | Guardian report (1) | Guardian report (2) | Inside Housing report | Public Finance report
A briefing paper analyzed the consequences of the changes to tax allowances and the uprating of benefits announced in the 2012 Autumn Statement. The measures would increase the number of children living in poverty by 200,000 in 2017-18. The amount of support given to low-income families in real terms would fall significantly, pushing many families and children into relative poverty. Reforms to personal taxes would provide the greatest benefit to those on middle incomes, but would not reverse the impact of real cuts to benefits/tax credits. The combined changes to taxes and benefits would have the greatest impact on those people who were out of work, who would see their incomes fall on average by 0.44 per cent.
Source: Spencer Thompson, Analysis of Tax and Benefit Changes in the Autumn Statement, Institute for Public Policy Research
A think-tank report examined the options for reforming wealth taxes. It said that the case for wealth taxes was often made on theoretical grounds, focusing on arguments of economic efficiency and social justice, without an analysis of the political context in which politicians would have to seek to advance reform. The report highlighted the weaknesses of the existing wealth tax regime, and called for the reform or replacement of council tax, stamp duty, and inheritance tax.
Source: Kayte Lawton and Howard Reed, Property and Wealth Taxes in the UK: The context for reform, Institute for Public Policy Research
A study examined tax policy-making processes in a sample of developed countries (including the United Kingdom). In all the countries, the importance of tax policy-making was undervalued, under-resourced, and influenced by a very small group of people.
Source: Christopher John Wales and Christopher Peter Wales, Structures, Processes and Governance in Tax Policy-Making: An initial report, Oxford University Centre for Business Taxation
An audit report said that HM Revenue and Customs had improved its approach to tackling error and fraud in tax credits, but had not yet achieved a sustainable reduction in the level of losses.
Source: Tackling Tax Credits Error and Fraud, HC 891 (Session 201213), National Audit Office, TSO
A report by a committee of MPs said that the government was not doing enough to tackle tax avoidance schemes. Those who sold and promoted the schemes were 'running rings' around HM Revenue and Customs, and should be 'named and shamed'.
Source: Tax Avoidance: Tackling Marketed Avoidance Schemes, Twenty-ninth Report (Session 201213), HC 788, House of Commons Public Accounts Select Committee, TSO
An audit report raised concerns over the impact of budget cuts on HM Revenue & Customs ability to collect tax and support the coalition governments new universal credit programme.
Source: HM Revenue & Customs: Progress on Reducing Costs, HC 889 (Session 201213), National Audit Office, TSO
A paper presented statutory tax progressivity indicators for the 34 OECD member countries on the basis of average effective income tax rates and tax 'wedges'. There was a pattern of decreasing tax progressivity across income levels. In some countries, the tax system became regressive when the social security contribution ceiling had been reached. Child benefits increased progressivity (especially at low income levels) and their effect was larger than the flattening impact of social security contributions, except at top income levels. Reductions in social security contributions targeted at low incomes and dependant spouse allowances increased progressivity in some OECD countries. Income-splitting systems typically had the opposite effect.
Source: Dominique Paturot, Kirsti Mellbye, and Bert Brys, Average Personal Income Tax Rate and Tax Wedge Progression in OECD Countries, Taxation Working Paper 15, Organisation for Economic Co-operation and Development
A report (by an official advisory body) made a range of recommendations designed to make tax simpler for pensioners. It proposed simplifying the married couple's allowance to remove the existing income abatement system and streamlining administrative aspects, replacing it with a flat-rate payment for those still eligible. It also said the 10 per cent savings rate was both complex and ineffective, with low awareness and take up: it would be much simpler and more effective to abolish the 10 per cent rate and use the money saved to improve other incentives.
Source: Review of Pensioners' Taxation: Final Report, Office of Tax Simplification
A paper examined the impact of taxes and benefits on work incentives, using a lifecycle perspective. Individuals experienced considerable variability in work incentives their lives, outweighing the variability across individuals. Work incentives varied dramatically depending on family composition, and most women experienced a number of different family types during the course of their lives.
Source: Mike Brewer, Monica Costas Dias, and Jonathan Shaw, How Taxes and Welfare Distort Work Incentives: Static lifecycle and dynamic perspectives, Working Paper 13/01, Institute for Fiscal Studies
A report compared income tax burdens for one-earner families (married couples and single parents with two children) across developed (OECD) countries. United Kingdom income tax, as a percentage of gross wages, was greater than the OECD average at all income points considered. Furthermore, the disparity was greatest for low-income families.
Source: Alistair Pearson and David Binder, The Taxation of Families – International Comparisons 2011, CARE
A paper examined how well a modern tax system, based on annual information, targeted lifetime inequality for women; and which aspects of the transfer system were most progressive from a lifetime perspective. The tax and benefits system was found to be more redistributive from an annual than from a lifetime perspective, and was most progressive at the bottom of the income distribution in both cases. Heterogeneity in family experiences throughout adult life was the main vehicle through which the tax and benefits system moderated lifetime inequality. Although transitory, family conditions under which working was especially costly, such as lone motherhood, were especially prevalent among the lifetime poor. By targeting this group, particularly using policies specifically designed to improve the work incentives of those with the lowest earnings capacity, the tax and benefits system did achieve life-cycle redistribution. Other policies, such as universal benefits for family with children, were less well targeted towards the lifetime poor but were more progressive and improved the work incentives in the middle 60 per cent of the distribution of lifetime income.
Source: Mike Brewer, Monica Costa Dias, and Jonathan Shaw, Lifetime Inequality and Redistribution, Working Paper 12/23, Institute for Fiscal Studies