Liberal Democrats call for reform to the Tax system

2.00.00pm BST (GMT +0100) Tue 18th Sep 2007

4p off income tax proposed by LibDems

Conference, also today debated the Tax Reform Policy Paper - Reducing the Burden. After ten years of the current Labour Government the tax system remains unfair, with the bottom 20% of households paying a higher proportion of their income in taxes than the top 20% of households. Wealth inequality is now worse than at any time under Margaret Thatcher.

Conference called for the reform of the tax system make it:

a) Fairer - with tax cuts for those on lower incomes paid for by removing loopholes exploited by the rich.

b) Simpler and easier to understand - especially for pensioners and small businesses.

c) More decentralised - so that there is a clearer link between local services and local accountability.

d) Greener - giving incentives for responsible use of resources. Conference asserts that it is feasible and right both to change environmentally damaging behaviour and raise revenue through the tax system.

Conference welcomed the fact that Liberal Democrats are the only party that has firm plans for fairer and greener, but not higher, taxes.

Conference in particular welcomed proposals to:

1. Cut the basic rate of national income tax by 4p - this will mean that even after Council Tax is abolished and replaced by Local Income Tax, the vast majority of people will be paying a lower rate of income tax overall.

2. Abolish the unfair Council Tax and replace it with a tax based on the ability to pay - Local Income Tax is a fairer way to raise local government revenue, as acknowledged by Sir Michael Lyons in his review of local government.

3. Increase environmental taxes, particularly by reforming Air Passenger Duty into an Aircraft Tax and more sharply graduating VED by emissions on new cars.

4. End taper relief for Capital Gains Tax.

5. Limit tax relief on pension contributions to the basic rate.

6. Return the Business Rate to local control, and place it on a site value basis within one parliament.

7. Reform residential stamp duty, ending the current regressive 'slab' structure, with the long-term objective of ensuring all those buying properties up to £500,000 in value pay less than at present.

8. Reform Inheritance Tax by raising the threshold at which estates start to pay IHT, with a medium-term objective of raising the starting threshold to £500,000, and limiting the exemption on lifetime gifts to those made 15 years before death.

9. Radically simplify the tax code, removing hundreds of pages of regulations.

10. Introduce a simplified 'postcard' style tax return form, which would release over 6 million taxpayers from the need to fill in a full tax return.

11. Introduce a simple statutory definition of residence for tax purposes to make the rules clearer and reduce compliance costs.

12. Bring gains made by non-residents on property situated in the UK within Capital Gains Tax.