Liberal Democrats commit to simpler, fairer taxes

12.00.00am BST (GMT +0100) Sun 18th Sep 2005

The Liberal Democrats began their tax consultation today, reinforcing their commitment to a reformed and transparent taxation system.

The recently established Tax Commission highlights four key principles of a liberal tax system - fairness, simplicity, decentralisation and economic efficiency. The present British taxation system is found wanting in all these areas.

The bottom 20% of UK households pay 39.5% of their income in direct and indirect taxes, while the top 20% pay 34.2%. The government's tax credit system has caused severe administrative problems and significant hardship.

The only tax stream under local control is Council Tax, which accounts for a mere 5% of total tax receipts. There are also a range of perverse incentives in the present tax regime, such as VAT applying to building repairs and renovations but not to new build, creating a bias in favour of construction rather than repair.

The Tax Commission's work will run alongside the Meeting the Challenge consultation, which seeks to prepare the party for the key policy challenges over the next Parliament.

Commenting, Vince Cable MP, Liberal Democrat Shadow Chancellor, said:

"The present taxation system is riddled with unfairness, complexities and unnecessary bureaucracy.

"We will be reviewing all aspects of the current tax system with an open mind. We are working towards a set of tax proposals which are fairer and simpler, and which strengthen local accountability and environmental protection."

"The Liberal Democrats have always supported fair and transparent taxation. Under Labour, red tape and bureaucracy has spiralled, and the rich continue to contribute a lower proportion of their income than the poorest in our society. That cannot be acceptable."