ALTER to respond to Commons Treasury Select Committee inquiry on Tax

ALTER is preparing a response to the Treasury Select Committee's invitation for evidence on the effectiveness of the current tax system. Brian Hodgkinson, author of The New Model of the Economy, has drafted a 3000-word Memorandum to be sent to MPs on the Committee in January.

The questions asked by the Committee go right to the fundamentals:

• What are the key principles which should underlie tax policy?
• How can tax policy best support growth?
• To what extent should the tax system be structured to support other specific policy goals?
• How much account should be taken of the ease and efficiency with which a particular tax can be imposed and collected?
• Are there aspects of the current tax system which are particularly distorting?

The Inquiry appears to have been triggered by the publication of the Mirrlees Review last month. The Institute of Fiscal Studies (IFS) invited Nobel Prizewinner Sir Richard Mirrlees to head a study of the UK tax system. Several ALTER members had discussions with his team during 2009/10 and were pleased that he concluded in his draft report, published online, that "there is a strong case for levying a land value tax" (Ch. 20 p.6).

The Review's detailed analysis of the taxation of land and property, still in draft, (Chapter 16) reads very like Lib Dem current policy: it recommends that business rates be based on site values only but has doubts whether a residential form of LVT would be sensible at this time. Instead Mirrlees calls for a Housing Services Charge, similar to VAT!

In addition to IFS, the OECD recently stated the view that governments ought to be removing "disincentives to work" by changing "the overall tax structure to raise more revenue from taxes on consumption and residential property tax and less from personal and corporate income taxes".