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The Progressive Policy Think Tank
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IPPR North IPPR Scotland

Tax and recovery: Beyond the binary

Even before the pandemic struck, the UK tax system was in serious need of reform. It is inefficient, unfairly taxes labour more than capital, exacerbates inequality, and fails to shape the economy in a sustainable way.

The briefing shows that alongside a major stimulus, reforming and raising certain taxes now could ensure the recovery is more balanced, more sustainable and prevents inequality from escalating further. Indeed, such a package would have a large positive effect on the recovery. This does not preclude a discussion of further tax reform in the future. But some initial changes should start now to lay the foundation for a more prosperous and just post-pandemic recovery.

We propose four priority reforms that could take place even before the recovery has been achieved: raising capital gains and dividend tax, raising corporation tax, reforming wealth taxes and a land value tax. These could make the system significantly more balanced, raise up to £55 billion, and have only a small impact on growth during the recovery. 

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