‘Tax after coronavirus’ inquiry launched
Committee members said the reconstruction of the economy after the unprecedented economic fallout of the coronavirus crisis “is an opportunity to examine the tax system”.
It will look at the long-term pressures on the UK tax system and whether these pressures should be met with tax reform.
Members will also seek evidence on what overall level of taxation the economy can bear, the role of tax reliefs in rebuilding the economy, and whether there is a role for windfall taxes in the post-coronavirus world.
Mel Stride MP, chair of the treasury committee, said: “The UK economy, like many economies around the world, has been placed under extraordinary stress due to coronavirus, with the worst of the economic fallout perhaps yet to come.
“Tax will play a major role in the years ahead in restoring the public finances and ensuring that we have a recovery which is balanced across the UK and fair to all.
“The committee has launched this inquiry to examine how the government should approach taxation after the coronavirus.”
Glyn Fullelove, president of The Chartered Institute of Taxation (CIOT), said: “The UK economy faces enormous challenges in the aftermath of the Covid-19 pandemic.
“Whatever policies are adopted to meet the challenges ahead, being able to predict what the UK tax system will deliver under any given set of measures is vital for the chancellor of the exchequer. Exploring whether this is possible is a vital task.
“I am delighted the treasury committee has launched this inquiry into the weaknesses – and strengths – of the system as it stands.”
‘Difficult choices on tax policy will have to be made’
Rachael Griffin, tax and financial planning expert at Quilter said come autumn, the government will need to reel in spending and increase tax to ensure the sustainability of the public finances.
Griffin said: “There’s no doubt the chancellor will have to raid the piggy bank, and difficult choices on tax policy will have to be made. The committee’s focus on post-pandemic tax reform is a welcome next step as it is important there is adequate consideration of how any potential change can be implemented efficiently, without distorting behaviour and while ensuring fairness to all. The recommendations it puts forward will surely contribute to the pressure on the chancellor to find creative solutions to the complex challenges he faces.
“The chancellor has signalled his intention to put the public finances back on a sustainable footing in the autumn, but precisely what this should mean for tax changes has already generated considerable debate. For example, the recently revealed Office for Tax Simplification (OTS) review of Capital Gains Tax (CGT) has seen pundits throw everything into the mix, from removing the capital gains tax (CGT) primary residence relief, to scrapping CGT entirely. And there has been considerable discussion about the possibility of higher taxes on personal wealth, with the conservatives seeking to exploit the shadow chancellor’s apparent willingness to explore potentially controversial levies on private wealth.”
She added that balancing the economy and public spending is difficult enough during periods of stability but is much harder as demand slumps, public debt widens and consensus is on more spending on key public services.
“He must now look at where to apportion taxes across income, consumption, capital and assets, and consider how the exchequer can raise funds fairly, and without compounding economic damage by suppressing demand and curbing incentives to work and invest,” Griffin said.