The Mirlees Report- a policy basis for ALTER?

ALTER needs to extend its thinking to taxation issues beyond LVT. Taxation is an extensive subject, and we may not have the capacity to develop a comprehensive position by ourselves. Therefore it is worth looking at examples where such work has been done.

An example of a systematic approach to taxation is the Mirlees review. This contains a systematic review of the tax system, outlines fundamental principles, and does support limited application of LVT. It might be a better use of time to define the position of ALTER with reference to Mirlees. With this in mind Mirlees was briefly discussed by about 20 ALTER members at our London mini-conference of 16 November 2013, held at the Three Stags pub in Lambeth.

Mirlees provides some useful basic principles.

- Not all taxes need address all objectives, e.g.

• The overall system must be progressive, but not each tax comprising the system need be.
• Not all taxes need be 'green' even if the overall system is.

- The tax system should be neutrality, i.e. treat similar economic activities in similar ways (e.g. corporate equity vs. loans).

- Pure economic rents can be taxed without creating economic distortions.

It makes specific proposals, some of which the meeting could easily agree with:-

- A single tax in income (including property income). This was agreed.

- Merge tax and national insurance. Agreed.

- The combined rates of corporate and shareholder taxation should equal income tax. Agreed.

- Increase taxation of dividend income to match wages

- Cash saved or invested for purposes of generating future income should be treated as a deductible expense. No consensus.

- There is a strong case for levying a land value tax (with the aim of taxing economic rent). Agreed.

- There should be a tax on lifetime transfers to the next generation. No consensus.

- The current system of corporate taxes which favours debt over equity must be corrected. Agreed.

- Reform benefits system to remove punitive effective marginal tax rates. Agreed.

- Remove VAT anomalies (e.g. exemptions on children's clothes) and extend to consumption of housing. No consensus.

- Introduce national system of road pricing. No consensus.

Summing up, Mirlees cannot be treated uncritically but appears to be a good basis on which to base our position on other taxes.