Top think tank urges tax overhaul


The Institute for Fiscal Studies (IFS) has submitted a report to the government outlining its suggestions for an overhaul f the current tax system.

The IFS has created a system that would see indirect taxation simplified and leave more money for benefits and reducing income tax. A main aspect of the overhaul is adding VAT to the majority of goods on sale. Despite the forthcoming VAT rise, many products, such as children’s clothes, books and food, are not subject to VAT sales tax. A blanket rise would lessen the need for benefit cuts and higher income tax.

Sir James Mirrlees, the creator of the report, hit out at the current tax regime: “The review shows that the UK system falls short of the ideal in costly and inequitable ways It discourages saving and investment, and distorts the form they take. It favours corporate debt over equity finance. It fails to deal effectively with either greenhouse gas emissions or road congestion. The revenue it raises, and the redistribution it does, could be achieved in less costly ways.”

He added: “We propose both a long-term vision of a better system, and directions for reform. Some of the recommended reforms involve tweaks to current policy; others involve radical change, and are probably for the longer term.”