UK Prime Minister Andy Burnham is considering tax increases to address major spending pressures from an aging population and the need to rebuild the country’s armed forces. Tax as a share of British economic output is already forecast to rise to 37% this year, its highest since 1948.
Tax Options
Burnham has several options to raise taxes, including increasing income tax, national insurance, and value-added tax. However, Labour’s 2024 manifesto ruled out increasing the rates of these taxes. Burnham may also consider freezing the salary levels at which the 20%, 40%, and 45% rates of income tax become payable, which would raise £5 billion a year if frozen beyond 2031.
Other options include reviewing VAT exemptions, which range from most food to ebooks, and increasing corporation tax on company profits. Burnham has also spoken in favor of a lower 10% VAT rate for hospitality businesses and shifting the burden of business rates more towards out-of-town warehouses and superstores.
Capital Gains Tax
Burnham has said that Britain “overtaxed labor and undertaxed” wealth, making capital gains tax a likely target for raising revenue. Capital taxes account for 5% of government revenue, compared with 30% from income tax. The International Monetary Fund has warned that capital taxes are more prone to avoidance than other taxes.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
