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Here’s how we redistribute taxation as a Socialist Government
1. Marginal income tax rate of 50%: The government could consider levying a marginal rate of income of 50% on incomes over £100,000. This alone has a potential to raise tax revenue of nearly £7 billion a year.
3. Restrict tax relief on pension contributions to basic tax rate only: Many ordinary people are unable to put enough away for pensions. This is the inevitable outcome of a highly skewed distribution of income. The tax relief on pension contributions is estimated to be over £21 billion a year. Most of it is claimed by around 3 million higher rate tax payers. The government < http://www.publications.parliament.uk/pa/cm200607/cmhansrd/cm070427/text/70427w0010.htm> admits that "If relief on individual contributions were constrained to the basic rate of tax, this amount of relief would fall by one quarter" i.e. £5 billion could be made available to help the poor and pensioners.
4. Adjust capital gains tax rate: The government has reduced < http://www.guardian.co.uk/money/2008/mar/23/property.tax> capital gains tax (CGT) to 18%. In contrast, for 2008-20009 the proposed basic rate of income tax < http://www.hmrc.gov.uk/rates/it.htm> is 20%, and the marginal rises to 40% for taxable incomes over £36,000 per annum. Income is income whether it is raised from capitals gains, trade or salary and should be taxed in the same way. The current divide offers the well-off plenty of incentives to convert income to capital gains and pay taxes at a lower rate. There should be no difference between the taxation of income and CGT. This has the potential raise over a billion pounds.
5. Target organised tax avoidance: The UK is estimated to be losing between £97 billion and £150 billion < http://business.timesonline.co.uk/tol/business/law/corporate_law/article671458.ece> of tax revenues each year. Companies and rich individuals use offshore tax havens, trusts, transfer pricing and even spurious royalty programmes to avoid taxes. Despite a lot of headline grabbing speeches, little dent has been made into this vast figure.
7. Charge full VAT for aviation fuel. Currently it enjoys exemptions. The ending of this exemption can raise £5billion - £7 billion.
8. Land Value Tax: Projects such as the Jubilee Line in London, building of motorways, roads, parks and other publicly funded amenities have resulted in vast increases in the value of land in adjacent increases. Almost all of it is due to public expenditure rather than any activity by the owners. A land value tax should clawback some of the increase.
10. End the war in Afghanistan and Iraq: A conservative estimate is that the never-ending war in Iraq and Afghanistan is costing around £5 billion a year. That money could be used to alleviate poverty at home.
12. Windfall Taxes: Water, gas, electricity and oil companies have been making bumper profits by heaping huge price rises on consumers. Part of their excessive profits should be clawed back through windfall taxes.
The ultimate aim must be increase tax free personal allowances to free anyone on the national minimum wage from income tax and national insurance contributions. The monies can also be used to raise the UK state < http://www.guardian.co.uk/money/2007/nov/13/statepensions.personalfinancenews> pension, currently averaging at just 17% of earnings, compared to an EU average of 57%, and exempt many essential items from VAT altogether.
Conservatives would like to make political capital, job of the opposition, out of it. But it is worth recalling that they
- introduced the biggest hike in indirect taxes (VAT); -destroyed the state pension by abolishing the link with earnings; -opposed the national minimum wage -imposed full VAT on domestic fuel -did not have a fuel "winter" allowance for pensioners -provided huge cuts in direct taxes for the rich.
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