Tax rises on self-employed could backfire on UK economic recovery, says IPSE

Tax rises on the self-employed would be the wrong option as the economy recovers from the coronavirus crisis, Derek Cribb, Interim CEO at IPSE (the Association of Independent Professionals and the Self-Employed) told the Treasury Select Committee last week.

Speaking at the wide-ranging evidence session, part of the Committee’s inquiry into ‘Tax after Coronavirus’, Cribb said the self-employed would struggle to handle any tax rises following the pandemic and many would resent bearing an extra financial burden given they had been excluded from the government support packages.

The Committee is looking to understand what the major long-term pressures on the UK tax system are and where any rises may need to fall in the post-coronavirus world.

Opening the session, committee chair Mel Stride MP asked the IPSE CEO where the self-employed would be most comfortable with any tax increases should the government decide to introduce them.

Cribb, according to an IPSE press statement, replied that the self-employed are typically “people with the lowest assets” and reserves, and would struggle to handle any increases, such as changes to dividend rates, Corporation Tax or National Insurance Contributions (NICs).

He suggested that if there were to be tax rises these should be part of an overall package that was targeted at larger companies able to bear the burden, through levying VAT on financial services or a higher differential Corporation Tax aimed at bigger employers, rather than small businesses and the self-employed.

Asked by committee member Steve Baker MP about whether self-employed people would be dismayed at the prospect of tax rises when many did not receive a government bailout, Mr. Cribb agreed.

He stated: “Effectively one in three members of the self-employed population have had no support whatsoever, so the idea of them having to pay tax to fill the coffers that have been emptied out into other people’s pockets is a little challenging to sell.”

“Many of them have already had to shut up shop and they will not be able to survive if they have to pay more tax. The government should leave it for a few years down the line and revisit later,” he said.