Tax continues to hit the headlines, with businesses frequently in the spotlight. Do businesses pay enough tax? Which companies pay the most? How competitive is the UK tax system and does it matter? Are there too many tax reliefs or too few? Whatever the perspective, the tax contribution of business is vital for public finances. How are governments going to continue funding hospitals, schools and all the other things we need if tax revenues can’t be sustained?
Ensuring we can pay for tomorrow goes beyond tightening up the tax rules so that everyone pays their share. There needs to be a more fundamental rethink of the taxes we need to raise and how. This is about taking a long term approach: how are people living, working, spending; how are businesses evolving and what sort of tax system can help them grow, and in turn grow the tax base.
Yes these are massive questions — but I think fundamental reform is both necessary and achievable. PwC has embarked on a project to drive this debate. Paying for Tomorrow is about pulling together views from all taxpayers – from students to pensioners, startups to multinationals, and NGOs to policy makers.
The first milestone in June was a Citizens’ Jury, where 22 members of the public heard from a range of experts before developing a framework for tax reform. We were bowled over by the level of interest in the debate. It was clear that people want a better idea of how taxes are raised and spent, and are more likely to support a system they understand. There was also a strong desire for a long term approach to tax reform, and frustration that tax is often governed by political short-termism.
Next up is a Business Jury, which will bring together a cross section of the UK’s business community. This will look particularly at the tension between UK tax competitiveness and ‘fairness’, and also the role of reliefs and exemptions. Other aspects of the project include a major competition for students, and analysis by our senior economic adviser, Andrew Sentance. Ultimately we will draw the perspectives together.
It would be naive to believe the road to reform will be straightforward, or that we can get to a tax system that everyone is completely happy with. In spite of these challenges, we need to be bold and open up the debate. By engaging with a wide range of opinion and tackling the big questions, we can start to build a tax system fit for funding tomorrow.
Paying for a fit-for-purpose tax system
Kevin Nicholson is Head of Tax at PwC and a member of the UK Executive Board, which he joined the in July 2008 as Head of Regions, responsible for our clients across the 27 regional offices. He became Head of Tax in July 2011.