Now is the time to reform the UK’s dysfunctional t

2022-04-05
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Now is the time to reform the UK’s dysfunctional tax system - Today News Post Today News || UK News

On March 3, Rishi Sunak, UK chancellor, will present a Budgettransmission control an. I have no idea what he will say. But it is clear what he should say.

It is far too soon to detail the fiscal adjustment that will eventually be needed in the aftermath of Covid-19 and Brexit. The economy has too uncertain a future and will continue to need robust fiscal support. Sunak must show he understands this. But what he also must do is prepare the ground for coming tax rises — and the tax reforms that should accompany them.

The Office for Budget Responsibility’s central case last November was for a jump of 20 percentage points in the ratio of net public debt to gross domestic product between 2019-20 and 2023-24. Combined with Brexit, the pandemic will also cause a permanent reduction in real GDP, relative to prior expectations. So, in the end, there will have to be a large fiscal adjustment.

Public debt is also on a rising long-term trajectory, largely because of an ageing population. While curbs on spending may contribute to the adjustment, it is politically inconceivable that they will contribute as much as they did after the 2008 financial crisis. So, the ratio of government receipts to GDP must rise. The chancellor has to say so, whatever his party’s resistance. That is his duty. It is also not the end of the world. Many countries have higher ratios of tax receipts to GDP than the UK, as well as higher real incomes per head. Among these are Canada, Denmark, Germany, Netherlands and SwedenThe strength of vaccines and doesn.

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