Abolishing stamp duty, scrapping 45p income tax would boost economic growth, says report

Edward Malnick
Picture 233201908 16/06/2020 at 18:02 Owner : Getty Contributor STOKE-ON-TRENT - JUNE 16: Various property signs are seen outside a block of terraced houses advertising homes for sale, let or sold on June 16, 2020 in Stoke-on-Trent. The British government have relaxed coronavirus lockdown laws significantly from Monday June 15, allowing zoos, safari parks and non-essential shops to open to visitors. Places of worship will allow individual prayers and protective facemasks become mandatory on London Transport.  - Nathan Stirk/Getty Images
Picture 233201908 16/06/2020 at 18:02 Owner : Getty Contributor STOKE-ON-TRENT - JUNE 16: Various property signs are seen outside a block of terraced houses advertising homes for sale, let or sold on June 16, 2020 in Stoke-on-Trent. The British government have relaxed coronavirus lockdown laws significantly from Monday June 15, allowing zoos, safari parks and non-essential shops to open to visitors. Places of worship will allow individual prayers and protective facemasks become mandatory on London Transport. - Nathan Stirk/Getty Images

Abolishing stamp duty and scrapping the 45p income tax rate would boost economic growth and place the UK among the top 10 most competitive countries in a league of developed nations, a new analysis claims.

A report by the Centre for Policy Studies think tank advocates a package of measures including an overhaul of property levies and abolition of the additional rate of income tax.

The centre-right body said the changes would see the UK rise from 22nd to 9th in the International Tax Competitiveness Index compiled by the Tax Foundation think tank in the US.

The report, A Framework for the Future: Reforming the UK Tax System, written jointly with the Tax Foundation, describes tax reform as one of the "main levers" the Government can use to boost the economy in the long term.

It suggests that tax cuts could be funded by extending VAT (the third largest source of government revenue) to cover far more goods and services, including by scrapping the zero-rating of food.

The analysis states that the UK currently has "one of the narrowest VAT bases" among the 37 developed countries that make up the Organisation for Economic Co-operation and Development, or OECD. 

Stamp duty, the report said, creates an "extra burden" when homes are sold, and can result in vendors deciding not to sell their properties. Removing the levy could "increase the dynamism of the UK housing market."

The additional, 45p rate of income tax is "too high to be truly competitive" and should be abolished at the earliest opportunity, the report added. 

"For a year-one revenue cost of around £600 million, this reform would give Britain the 12th lowest top rate of tax in the OECD, allowing it to leapfrog countries such as Australia and the United States, and putting it pretty much on par with Switzerland."

Labour would be likely to seize on any move to scrap the 45p rate as evidence that the Conservatives were looking after the wealthy rather than fulfilling their election pledge of "levelling up" the country.

Ahead of the December election, Boris Johnson postponed a plan, set out as part of his leadership pitch, to increase the threshold at which people start to pay the 40p higher tax rate from £50,000 to £80,000.

The Institute for Fiscal Studies had claimed the proposal would cost "many billions" and benefit the wealthy the most. But the report questions whether abolishing the additional rate would cost the Government any revenue, based on previous analysis.

It adds: "Abolishing the additional rate would help to make the UK a more attractive place to work, invest, and grow a business, especially from the perspective of internationally mobile corporations and individuals."