Liberal Democrat leader Sir Vince Cable has set out his views on tax policy, among other areas, in a booklet entitled ‘Beyond Brexit – Liberal policies for the age of identity’, published in March.
Much of the booklet will be familiar to those who have read recent Lib Dem policy papers, advocating as it does land value taxation, full integration of income tax and national insurance and a ‘proper carbon tax’, among other measures.
Sir Vince, who has announced that he will shortly be standing down as party leader, argues: “We should be having a proper national debate about how much the public is willing to pay in higher taxes (and what taxes) to pay for better financed public services. Liberal Democrats are clear that some rises in general taxation are justified, in particular to pay for healthcare, and that changes to the way we tax wealth are essential to fund the services and investment the public wants to see.”
Sir Vince says a “big, radical reform which is crucial is to shift tax from work (income tax and national insurance) to land… A prototype has been designed, replacing business rates by a landowner’s levy, which could progress from there to residential land (also replacing council tax). There are administrative and political challenges, but it is the direction in which we should be travelling.”
He adds: “Another fundamental change, which is obscured by arguments about how to squeeze more tax out of companies, is to shift to shift tax away from equity (risk capital) and on to debt, which is currently treated as tax-deductible. The Coalition recognised the need to make this change as a step to a more entrepreneurial business sector but it has not yet been followed through.”
Sir Vince also argues that:
- R&D tax credits are wasteful of resources compared to targeted investment by government alongside the private sector
- Rather than nationalising low-risk utilities like water companies, government should use windfall taxes to claw back ‘excess’ distributed profits and restrict them in future
- A ‘serious review’ is needed of the set of taxes which are there ‘to mitigate the sharp, jarring, differences brought about by asset inflation and unearned income’
- Capital gains tax reliefs fail to give an incentive to entrepreneurs who have built up a successful business to keep investing in it rather than selling out
- Government should look at how the tax system can incentivise downsizing for (mostly older) property owners
Sir Vince concludes: “The tax system is over-complex and needs radical reform to shift the burden of tax from work, savings and innovation on to unproductive wealth, land, expenditure (online or in shops, equally) and environmentally damaging activities – and meaningful international cooperation to ensure that the global rich and tax-dodging companies and individuals pay their share.”