National Contributions: Reforming tax for the 21st century (2021)

Percy, A; (2021)

To raise the revenues to meet the challenges of the 21st century, the UK’s tax system will have to be reformed to increase transparency, reciprocity, and solidarity. This report describes how those reforms can be made with a system of National Contributions that clearly links contributions to entitlements. There are three key features of National Contributions: a progressive rate structure linked to average incomes; a flat definition of incomes; and a commitment to the allocation of revenues from individuals to services for those individuals. It is a PRoFI tax system: Progressive Rates on Flat Incomes. We model a pathway to prosperity through modernising the tax system, simplifying and broadening the tax base, funding public services to build reciprocity, and then funding Net Zero investments. Distributional analyses of each stage on that pathway are included.

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