Taxing times: Where might additional tax revenues be found?

There are three reasons for thinking about where the next UK government might be able to find additional tax revenues:

1. More measures to cut the fiscal deficit will be required between 2015 and 2020, and if the 80:20 ratio of spending cuts to tax increases that has applied in the current parliament is going to be maintained then there will have to be some discretionary tax increases.
2. All political parties want to reduce some taxes. For example, both the Conservatives and the Liberal Democrats are likely to pledge to increase the personal tax allowance from £10,000 to £12,500 - which means other tax increases will be required to offset this cut.
3. There are long-term demographic pressures on public spending. If we want to retain current levels of provision of health and social care for older people, revenues will have to increase to pay for them. The alternative is a significant rundown in the quality of public services in the UK in coming decades.

For those looking for potential sources of additional tax revenues, there are no easy solutions to be found in other countries. A comparison of tax systems across OECD countries shows that the UK is a fairly average country when it comes to taxation. There are many other economically successful countries - in particular in Scandinavia - that have a significantly higher ratio of tax to GDP, but there are also countries with a lower ratio.

There are, however, some pointers as to where to start, particularly with the aim of increasing revenues in a progressive way and without causing economic damage. This report assesses the potential of three broad classes of new tax revenue:

• less unpopular taxes, such as the frequently mentioned 'mansion tax'
• mainstream taxes, such as changes to VAT or national insurance
• entirely new taxes, such as taxes on wealth, land or financial transactions.