21st century Britain is changing, and our tax system is struggling to catch up. From the changing nature of work, to an ageing population and our transition to a green economy, all of these changes have huge implications for both the amount of revenue we need, and the kind of taxes needed to collect it. The future of our tax system is set to be a major battleground in the election campaign, with parties setting out plans for major tax rises and tax cuts. Are we paying more or less tax? Who stands to gain or lose the most from the main parties’ tax pledges? And more importantly, how do these plans match up with their own economic priorities, and the UK’s demographic and environmental pressures? At an event at its Westminster offices, the Resolution Foundation presented new analysis on the changing shape of the UK’s system, and the main parties’ tax plans. A panel of leading tax experts discussed what tax reforms that Britain needs, the opportunities and risks of the parties’ tax pledges, and how the issue of tax will play out in the General Election.

1. #Election2019
Wifi
2QAG_Guest
Welcome_Guests November 19@resfoundation
A taxing election
Do the parties' plans meet the needs of modern Britain?
Sir Edward Troup, former Executive Chair of HMRC
Professor Judith Freedman, Professor of Taxation Law and Policy,
Oxford University
Adam Corlett, Senior Economic Analyst, Resolution Foundation
Chair: Torsten Bell, Chief Executive, Resolution Foundation

2. #GE19
November 19@resfoundation
A taxing
election?
Adam Corlett
Resolution Foundation

3. 3
1) Are taxes ‘high’?
2) What are the biggest challenges
facing the tax system?
3) What might the parties propose?
@resfoundation

4. 4
Are taxes ‘high’?
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5. 5
By international standards, taxes are not high
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Tax revenue as a share of GDP: 2015 to 2017
Source: OECD

6. 6
By historical standards, taxes are on the high side
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Revenue as a share of GDP
Source: OBR

7. 7
By historical standards, total receipts are average but rising
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Revenue as a share of GDP
Source: OBR

8. 8
But changes in tax/GDP don’t just reflect tax policy changes
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• The labour share is relatively highly taxed, and has risen
• Business investment is a low-tax activity, and has shrunk
• Increases in earnings inequality pushed up average tax rates

9. 9
Household tax burdens have…
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Average taxes as a share of gross income, by equivalised household disposable income percentile
Source: RF analysis of ONS, Effects of taxes and benefits on household income

10. 10
Household tax burdens have fallen
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Average taxes as a share of gross income, by equivalised household disposable income percentile
Source: RF analysis of ONS, Effects of taxes and benefits on household income

11. 11
Household tax burdens have fallen
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Average taxes as a share of gross income, by equivalised household disposable income percentile
Source: RF analysis of ONS, Effects of taxes and benefits on household income

12. 12
Income tax burdens have fallen a lot
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Effective tax rate for an employee on median pay
Source: RF analysis using median earnings figures from ASHE/NESPD and tax history from HMRC and IFS

13. 13
What are the biggest challenges
facing the tax system?
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14. 14
1: It’s all uphill from here – more revenue will be needed
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Cumulative real-terms change in per-capita RDEL since 2009-10: UK (GDP-deflator)
Notes: Figures adjusted for machinery of government changes. Source: RF analysis of HMT, PESA, various, and HMT Spending Round 2019

15. 15
2: Our wealth taxes aren’t up to the job
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Proportion of GDP
Source; RF analysis of ONS, Wealth in Great Britain; ISER, British Household Panel Survey; ONS, UK National Accounts; D Blake & J Orszag, ‘Annual estimates of
personal wealth holdings in the United Kingdom since 1948’, Applied Financial Economics, 9, 1999; OECD.Stat

16. 16
3: It’s hard to raise money when the system is full of holes
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Tax paid on £100,000 of market income, by legal form
Source: RF analysis

17. 17
3: It’s hard to raise money when the system is full of holes
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Tax paid on £100,000 of market income, by legal form
Source: RF analysis

18. 18
4: £44 billion of revenue may need replacing - soon
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Tax receipts in 2019-20
Source: OBR

19. 19
What might the parties propose?
(and what should they do)
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20. 20
Labour proposes income tax rises above £80,000
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Average policy impacts in 2023-24 by household income decile
Source: RF analysis using the IPPR tax-benefit model

21. 21
The Conservatives are likely to propose a NICs cut
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Average policy impacts in 2023-24 by household income decile
Source: RF analysis using the IPPR tax-benefit model

22. 22
If they do, they should ensure workers on UC aren’t short-changed
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Average policy impacts in 2023-24 by household income decile
Source: RF analysis using the IPPR tax-benefit model

23. 23
There will be a wide range of corporation tax rates on offer
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Headline corporate tax rates
Source: KPMG, with RF projections

24. 24
The tax gap between the big two parties could easily be £60bn
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Revenue as a share of GDP
Source: OBR, with RF projections

25. 25
But….
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• Do they have a long-term vision of how the NHS and social
care will be adequately resourced?
• Do they have any policies that would improve council tax or
inheritance tax?
• Do they have a plan to close holes in the tax system?
• Do they have a plan for vehicle taxation and other green taxes?

26. #GE19
November 19@resfoundation
A taxing
election?
Adam Corlett
Resolution Foundation