The case for a flat tax

Simplifying the tax system promises to cut incentives for evasion and avoidance, and boost work and entrepreneurship. Could it give post-Covid-19 Britain the lift it needs?

Rishi Sunak © Paul Grover/Shutterstock
Rishi Sunak: he needs to think big
(Image credit: © Paul Grover/Shutterstock)

What is proposed?

That there should be just one single positive marginal rate of tax – 20%, say – rather than progressively higher rates as earnings rise (as under the current system). The idea is to simplify the system so as to encourage compliance and create an incentive for higher earners – thus boosting the economy. In theory, a flat-tax structure could be devised in which one single rate covers income tax, national insurance, corporation tax, value-added taxes and even inheritance tax. The US academics with whom a flat tax is most associated, Robert Hall and Alvin Rabushka, argued for a flat tax on both individuals and companies, for example. In general, however, the term “flat tax” typically means replacing the existing income-tax rules with a single marginal tax rate and sweeping away the various tax bands, exemptions and allowances.

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Simon Wilson’s first career was in book publishing, as an economics editor at Routledge, and as a publisher of non-fiction at Random House, specialising in popular business and management books. While there, he published Customers.com, a bestselling classic of the early days of e-commerce, and The Money or Your Life: Reuniting Work and Joy, an inspirational book that helped inspire its publisher towards a post-corporate, portfolio life.   

Since 2001, he has been a writer for MoneyWeek, a financial copywriter, and a long-time contributing editor at The Week. Simon also works as an actor and corporate trainer; current and past clients include investment banks, the Bank of England, the UK government, several Magic Circle law firms and all of the Big Four accountancy firms. He has a degree in languages (German and Spanish) and social and political sciences from the University of Cambridge.