There are clear visions of tax reform – Reeves needs only one support

Stay in view of the free updates

Simply subscribe to UK tax Myft Digest – it is delivered directly to your inbox.

The writer is the director of the Institute of Financial Studies, and he is a thinking center

Rachel Reeves faces a difficult budget. She used her speech at the Labor Party conference to reaffirm her commitment to financial rules and warn of upcoming test times. Like the rest of us, the consultant clearly expects the position of budget responsibility office to predict that, without procedure, daily spending will continue to overcome revenues, and penetrates the “iron” borrowing base. It is very likely that a new round of tax height, despite her promise last year not to return to more.

All advisor’s revenue options seem unattractive. Large sums can be raised directly by increasing the rates of one of the three major taxes (or extension of freezing in personal tax allowances) – options that would violate the Labor Party statement.

Top taxes on wealth may satisfy some activists. But the bitter taste of raising the inheritance tax on agricultural lands remains. HMRC estimates that raising a capital profit tax can already lose money, although I think the high CGT prices will, to some extent, revenue in the medium term. Either way, just raising tax rates on capital gains, profits, or property income – or a new tax on wealth – would weaken investment incentives.

All this is difficult to decline as necessary to enhance growth. As for “sin taxes”, for example in the gambling industry, there may be only small sums to seize them.

In the face of such an unpalatable list, what should be done? My advice is to stop thinking in terms of isolated tax increases and start a vision. The entire system is chaos. The weak design prevents investment and leads to the removal of resources from its most productive uses. People with similar income can face significantly different tax bills, undermining fairness. The complexity of complexity reaches the time and hardship of lawyers, accountants and businessmen, which can be better published. However, many revenues are raised, however, progressive taxes exist, the system must be more fair and less harmful to growth.

The road should be paved into a better tax system with specific measures. But expressing the final destination it provides in reality, which must prevent steps in the wrong direction. It also provides an opportunity to build a consensus on the ultimate goal, before there is an inevitable dispute over the exact way to get there. The losers may rise from the high taxes if they see themselves as part of an initial shift towards a more just system and higher growth, instead of being arbitrarily targeting as a group that is politically easier to extract revenues.

The vision is also an opportunity to talk about who will win a better system. Consider how to impose taxes on entry. There is a great, unjustified bias, problems against employment, employment, business ownership and capital. But the treatment of investment revenues is inconsistent and dispersed. The target should be well designed allocations that ensure that the tax is not distorted at a level, type or financing of investment. With a reasonable tax base, the total marginal tax rates must be aligned across all forms of income and gains, so that a tax is imposed on the additional pound in the same way, regardless of its source.

The consultant must use this budget to explain and adopt the virtues of this destination. It will be more fair and cause less damage to growth. As a first step, it can provide more previous inscriptions for people who invest in their own business, while increasing capital profit tax rates. It would help in investing in entrepreneurship and gradually increasing revenues.

Or take housing. The council tax is decliningAnd based on the values ​​of property that are (at least in England and Scotland) 34 years old. Sealing the obligation of the malicious tax that flies movement and growth. A good vision is to cancel both and replace them with frequent new real estate taxes that are appropriate to updated assessments. It will be more fair. Growth will be higher. Reeves can announce a future date for re -evaluation, and at the same time raising prices on homes at the highest council tax teams. At least, the stamp fees should not be paid up.

It can also use the repair to address the general financing problem that is looming on the horizon. Revenue from fuel duties – currently more than 24 billion pounds – will be lost as a result of transporting the country to electric cars. At the same time, the largest social cost of leadership is not emissions, but crowding. The government urgently needs a plan to replace the decrease in revenues and stop the congestion – which is to grow to grow – from the height. One of the options is to clarify the issue of pricing on the roads, as the gradual disposal of this is with a decrease in revenue from fuel duties. This will not reinforce the revenues – but it will stop its decline, which helps to reassure investors that the government is serious in financial sustainability.

Nothing of this means that tax reform is easy. not so. And if Reeves also decides to raise tax revenues significantly, it is likely that you create more losers than the winners. But the reform creates at least two winners-and will provide some good news that affects the need.

There are some other good news for the consultant: there is a northern star tax that already exists. Experts have started for decades how a coherent, effective and fair tax system will look like. The problem is not the lack of enlightened offers for such a vision. It is also not a deficiency in a vision that can get widespread support. But the discussion is often about gradual adjustments, which makes everything seem difficult impossible. If we want to do difficult things, we need a clear reason for them.

Reeves may feel that she cannot avoid tax increase. But she can still choose steps towards a more just, simpler and better system for growth. This choice can determine its advisor.