Tories warned of dangers of flat tax

A right-leaning think-tank has warned the Conservatives that a flat tax may
not be the best way of lowering and simplifying the tax system.

In a report released today, the Centre for Policy Studies said that ‘an
attractive panacea – such as the flat tax – will not in itself solve the problem
of complexity.’

It also warned that a sudden and sharp reduction in tax rates could cause
‘immediate and potentially huge shortfalls that could destroy confidence in the

The Tory party announced last week that a commission would be established to
examine the implications of flat tax, which has been adopted across much of
eastern Europe.

The report said there was a strong case for simplifying the number of tax
rates, and proposed moving to two rates for individuals and one or two rates for

The FT reported that one possibility could involve introducing a 20%
basis rate and a 40 per cent higher rate for individuals – as well as a 20% rate
for companies. Over time, the higher tax rate could be reduced and the level of
personal allowances increased, it said.

The report called for the appointment of a Treasury minister responsible for
simplifying and rationalising tax law.

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