Manifesto > Enterprise: Creating a future for all (Introduction) | A Strategy for Growth and Prosperity | Low, Simple and Fair Taxation | Cutting the cost of the state | Deregulation: Industry, Employment and Incomes | Finance and Credit | Agriculture, Forestry, Fisheries and Foods

Enterprise: Creating a future for all

The myth that the poor benefit from high tax rates must be challenged.  High rates of taxation actually reduce revenue by removing the incentive to work or to reinvest, while the benefits system only serves in the long term to keep people poor.  Labour’s policy of increasing the tax burden is therefore flawed and even although many of their taxes are hidden they still feed through and stifle enterprise.

Introduce a flat tax on all incomes

We are committed to a radical shake-up of the tax system so that those on lower incomes will stop paying income tax altogether and everyone else will pay a simple, low flat rate of tax. Under our proposals for a flat-rate income tax (the ‘flat tax’), personal allowances would be greatly increased and nobody on the minimum wage would pay income tax. On present figures, the personal allowance would be £12,000 and everyone would pay 22 per cent of all earnings above this level. Flat tax would be phased in to avoid any sudden loss of revenue before its beneficial effects have started to feed through.

Taxation would also be simplified by removing complex tax credits and exemptions. The combination of a low tax rate and few exemptions will reduce the incentive to avoid tax and lower compliance costs. Countries which have already adopted a flat tax have found that revenue from higher earners has actually increased as they no longer have the incentive to avoid taxation in their home country. By implementing this measure, we will ensure that high earners pay their tax in Britain rather than employing armies of accountants to filter their money through tax havens and elaborate avoidance schemes. We will also use some of the £35 billion saved by cutting wasteful public spending programmes (see Cutting the Cost of the State) to replace any short-term loss in tax revenue.

A low flat tax will also reduce the ‘tax wedge’ – the difference between the cost of employing a worker and the income that the worker actually receives, another well known disincentive to work.

The benefits of flat tax will be felt most by the low paid. A study by the Adam Smith Institute found that:

• The poorest third of families currently pay 9% of their income in tax, however, under the flat tax proposal they would pay nothing. Around 10 million taxpayers would no longer have to pay income tax.
• Families on below average incomes would on average pay only half as much tax as at present.
• Higher earners would pay a higher proportion of tax than at present, partly due to the removal of incentives for legal avoidance and illegal evasion.

Introduce simple and transparent rules

Over the years our tax laws have become extremely complex as a result of having to deal with numerous loopholes created by new taxes. Therefore, in addition to greatly simplifying our tax regime, the New Party proposes a new test, the 'Rule of Primary Purpose', by which the taxation status of all income and investments shall be judged. This will allow natural justice to prevail and greatly reduce the number of protracted legal cases.

Set corporation tax at a competitive level

Corporate taxation is even more complex than personal taxation and imposes an enormous and unnecessary burden on business. Corporation tax must be set at a level which attracts inward investment and a its eventual merging with the flat tax would also give a much needed boost to our commercial sector.

Reform council tax and reduce business rates

Our proposals for local government (see pages 30- 31) would mean lower and fairer council tax. We will first of all transfer the funding of certain core services to central government and place education spending in the hands of parents through a long overdue voucher system (see page 17). Business rates will first of all be reduced by savings from the abolition of regional development agencies and abolished altogether in the longer term.

Reduce incentives for avoiding excise duties

Setting rates of duty on alcohol and tobacco at a much higher level than our neighbours, simply encourages smuggling. Instead of cutting demand it actually reduces the price to the end user and cuts the amount of government revenue. We would set the level of duty at the optimum level to discourage smoking and excessive drinking.

Reverse the upward trend in stamp duties

Stamp duties have risen significantly under the present government. We will raise the threshold for stamp duty to £250,000.

Review environmental levies

We would get rid of any environmental levies which failed to produce sufficient environmental benefit to justify the cost of compliance.

« Back | Up | Next »