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What impact would Brexit have on tax?

This article is not designed to persuade you to vote one way or the other; it is just some thoughts on tax if we do leave the EU.

Based on research by the National Institute of Economic and Social Research, the Evening Standard reported that leaving the EU would cost the typical household £400 a year extra tax. This is because GDP would be lower as a result of net migration falling.

The OECD believe a UK exit from the EU would immediately hit confidence and raise uncertainty which would result in GDP being 3% lower by 2020, which equates to £2,200 per household. But, in the long term it could be worse because of labour productivity.

If there is a Brexit the Government may feel to have an emergency Budget. One objective could be to protect levels of foreign direct investment which could be done by introducing capital gains tax exemptions.

The Government may also bring forward the previously announced reduction to corporation tax rates which would encourage businesses to stay in the UK.

VAT is European tax based a mixture of EU and UK law and accounts for about 20% of the tax collected in the UK. It could be replaced with a sales tax with different rates for different products and services and the requirement to report EU statistics on VAT returns would disappear.

The UK has double taxation agreements with most countries around the world so these should not be affected.

Image from Flickr by Charles Clegg.

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