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U-turns show 'tax reform without tax cuts is a political disaster'

    As soon as I heard about the Government's u-turns on the pasty and caravan taxes, I couldn't help but think of a key conclusion of the 2020 Tax Commission last week: 'tax reform without tax cuts is a political disaster.'

    Sure, opinion is divided today over whether the Government has done the right thing. On the one hand, the campaign against the taxes has shown that the general public know that taxes kill jobs - and should hearten those of us who believe that our tax burden is too high.

    But on the other, it's clear that we should aiming for low rates against a broader base, and if we were designing a tax system from scratch, there's no way we'd tolerate the sorts of anomalies and complication which riddle our current tax code. Should the tax system really distinguish between food that is cooling and food stored in a hot cabinet?

    What the opposition to these small tax changes show is that tax reform is a difficult business. The public has a tendency to put the status quo on a pedestal, and naturally will judge the change in their position from 'what is' rather than 'what should be'. Effective tax reform cannot be delivered in this climate in a piecemeal manner, however sensible the changes. Indeed, the sums of revenue gained from these changes were so insignificant, it's a wonder it was pursued at all. To work, tax reform needs to be much broader - and is only likely to be politically acceptable where the burden is being eased.

    Ryan joined the Centre for Policy Studies in January 2011, having previously worked for a year at the economic consultancy firm Frontier Economics.

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