The tax policies pursued by all major parties – as expressed in their election platforms – give general election voters a misleading impression of taxes over the next five years.
That’s the view of Robert Salter, technical director of tax at leading audit, tax and business advisory firm Blick Rothenberg. “The Labour manifesto, for example, suggests that a Labour government is only planning around £8bn of tax increases, which is essentially nothing when the government’s total tax revenue is around £1,000bn a year,” he said.
He added: “Criticism could also be leveled at the Conservative Party’s election manifesto, as the National Insurance cuts they promised would only be affordable if there were tax rises elsewhere (or significant spending cuts), while the Conservatives’ proposal for a special rate of relief “Personal taxation for retirees – so they can avoid taxes on their pensions – makes no broader economic sense.”
“While economic growth may provide all parties with some additional tax revenue – which they clearly hope for, the reality is that this is unlikely to provide any of them with significant additional tax revenue,” Robert said.
He added: “It is also valid to criticize the policies of the Lib Dems, Greens and Reform Party. Neither party has fully addressed the various tax distortions within the UK tax system which can result in taxpayers receiving marginal tax rates of between 55% and 60% (or even much higher in some situations), despite the highest income rate. Official in the United Kingdom. The tax is only 45%.”
“In addition, many of the tax measures that have been proposed simply will not work,” Robert said. “They will not raise any significant tax revenues, or may instead create additional negative taxpayer behavior and drive inflation or additional government borrowing.”
He added: “For example, all parties talk about attacking the tax gap – taxes that HMRC believe are due, but have not been paid for one reason or another. However, their plans do not include a meaningful analysis of how to reduce this tax gap and none of them acknowledge The parties publicly argue that the majority of the tax gap is caused by small business non-compliance – i.e. mistakes or deliberate actions by the UK’s smallest businesses. Alternatively, election manifestos talk about targeting tax evasion among larger businesses, which according to HMRC’s own figures does not constitute “Only a very small portion of the total tax gap.”
“Other tax plans mentioned are very easy to avoid – such as the Lib Dems’ plans to tax share buybacks by FTSE companies, which would likely bring no actual tax,” Robert said.
“Instead, the Greens’ proposals to change the National Insurance rules – so that the standard 8% National Insurance rate applies to all wages including those over £50,270 a year – would result in an effective marginal tax rate of 48% (40% tax and 8% National Insurance) for average earners, while the sharp tax cuts promised by the reform (for example with the personal tax allowance increasing from £12,570 at present to £20,000) are largely unfunded and could easily lead to inflation.”
“With all parties either keeping their true tax plans secret, or failing to acknowledge the real risks that could arise from implementing their election platforms, it is reasonable for taxpayers to challenge all major parties on tax and demand answers,” Robert said. “Otherwise taxpayers will only have themselves to blame when they face some nasty tax shocks over the next five years!”