Are we taxed to death?

ORIGINAL INTRODUCTION

Liz Truss’s government collapsed last autumn after markets reacted negatively to her tax-cutting mini-Budget. But the self-declared repair job done by Rishi Sunak and Jeremy Hunt has left the UK with its highest tax burden for decades. Not only did these events damage the Conservatives’ electoral prospects, but also marked an end to Boris Johnson’s ‘cakeism’ – high public spending without higher taxes – and an ideological defeat for free-market, low-tax advocates.

Yet the introduction of the US Inflation Reduction Act (US IRA) has seemingly re-opened the debate around tax competition after years of movement towards a global minimum tax. The US IRA offers a range of subsidies and tax breaks in green industries that potentially threaten UK investment opportunities just as the government has raised corporation tax. Meanwhile, the government’s focus on fiscal discipline seems to sit uncomfortably for some with the City of London’s reputation as an enabler of international tax avoidance.

There have been notable campaigns to reduce or abolish some taxes, like stamp duty and inheritance tax. Yet ministers seem unwilling to move on these issues, in part because of losing tax receipts, but also because tax cuts are regarded as too unpopular. Another issue is ‘fiscal drag’, where the freezing of tax allowances means most people pay more tax than before and more people are brought into higher tax bands as their wages rise.

One year on from the mini-Budget, can the tax system still play a role in ‘going for growth’?  With public finances under strain globally following the pandemic and the war in Ukraine, do Western governments need to clamp down harder on tax avoidance – or is capital flight an even greater risk in a polarised world? Did the fall of the Truss government mark the end of the vision of the UK as a potential ‘Singapore-on-Thames’, or does the emergence of the US IRA mean the UK can’t afford not to compete?

SPEAKERS
Paul Embery
firefighter; trade unionist; columnist; author, Despised: why the modern Left loathes the working class; broadcaster

Reem Ibrahim
communications officer, Institute of Economic Affairs; Linda Whetstone Scholar

CHAIR
David Bowden
associate fellow, Academy of Ideas