Anthony Butcher

Liberal Democrat conference today approved radical new tax plans that will drop the basic rate of income tax to its lowest level since 1916.

The move to cut the basic rate by four pence in the pound to 16p will benefit millions of people on low and middle incomes.

The plans build on those approved by the party conference last year and form part of the party’s proposals to lift the tax burden on low and middle income earners, whilst making the rich and people with environmentally damaging lifestyles pay a fairer share.

The revised proposals are tax neutral and have been independently evaluated by the IFS.
The proposals launched in the document Reducing the Burden: Policies for tax reform include:
· Reaffirming the commitment to abolishing Council Tax, replacing it with a tax based on ability to pay
· Removing tax loop-holes exploited by the super-rich
· Radically simplifying the tax code, removing over 500 pages of unnecessary regulations
· Reforming stamp duty to reduce the amount of tax paid on properties worth less than £500,000
· Reforming Inheritance Tax, with the aim of raising the starting threshold to £500,000


The full text of the motion reads:


Reducing the Burden (Tax Reform Policy Paper)

Conference regrets that after ten years of the current Labour Government:

i) The tax system remains unfair, with the bottom 20% of households paying a higher proportion of their income in taxes than the top 20% of households.
ii) Wealth inequality is worse than at any time under Margaret Thatcher.
iii) The tax system has also become incredibly complex under Labour, with the tax code doubling in length.
iv) Green taxes have fallen from 3.6 per cent of GDP in 2000 to just 2.9 per cent of GDP today.

Conference believes that the tax system should be reformed to make it:

a) Fairer – with tax cuts for those on lower incomes paid for by removing loopholes exploited by the rich.
b) Simpler and easier to understand – especially for pensioners and small businesses.
c) More decentralised – so that there is a clearer link between local services and local accountability.
d) Greener – giving incentives for responsible use of resources.
Conference asserts that it is feasible and right both to change environmentally damaging behaviour and raise revenue through the tax system.

Conference welcomes the fact that Liberal Democrats are the only party that has firm plans for fairer and greener, but not higher, taxes.

Conference therefore endorses Policy Paper 81, Reducing the Burden, as a statement of the party’s policies on reform of the tax system, building on and updating Policy Paper 75, Fairer, Simpler, Greener. Conference in particular welcomes proposals to:
Now
1. Cut the basic rate of national income tax by 4p – this will mean that even after Council Tax is abolished and replaced by Local Income Tax, the vast majority of people will be paying a lower rate of income tax overall.
2. Abolish the unfair Council Tax and replace it with a tax based on the ability to pay – Local Income Tax is a fairer way to raise local government revenue, as acknowledged by Sir Michael Lyons in his review of local government.
3. Increase environmental taxes, particularly by reforming Air Passenger Duty into an Aircraft Tax and more sharply graduating VED by emissions on new cars.
4. End taper relief for Capital Gains Tax.
5. Limit tax relief on pension contributions to the basic rate.
6. Return the Business Rate to local control, and place it on a site value basis within one parliament.
7. Reform residential stamp duty, ending the current regressive ‘slab’ structure, with the longterm objective of ensuring all those buying properties up to £500,000 in value pay less than at present.
8. Reform Inheritance Tax by raising the threshold at which estates start to pay IHT, with a medium-term objective of raising the starting threshold to £500,000, and limiting the exemption on lifetime gifts to those made 15 years before death.
9. Radically simplify the tax code, removing hundreds of pages of regulations.
10. Introduce a simplified ‘postcard’ style tax return form, which would release over 6 million taxpayers from the need to fill in a full tax return.
11. Introduce a simple statutory definition of residence for tax purposes to make the rules clearer and reduce compliance costs.
12. Bring gains made by non-residents on property situated in the UK within Capital Gains Tax.

3. After 10 years of the current Labour Government the tax system remains unfair, with the bottom 20% of households paying a higher proportion of their income in taxes than the top 20% (36.4% v. 35.5%: Source: http://www.statistics.gov.uk/downloa...ts_2005_06.pdf page 8).

4. Wealth inequality has been worse under Tony Blair and Gordon Brown than under Margaret Thatcher. (The Gini coefficient, a statistical measure of inequality, averaged 65 under Thatcher and 69 under Tony Blair & Gordon Brown). The Government now will not publish wealth inequality statistics for 2004. The latest year that statistics are available is 2003. <SPAN lang=EN-GB>The Government is no

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