The Labour Party manifesto makes the promise of fairer taxes. There are income tax changes with a new 10p starting rate and the top rate of tax will be increased from 45p to 50p for people

earning over £150,000. There will be no increases in VAT or national insurance, and core tax rates and tax credits will remain fixed. For businesses, there are a series of measures to reform

corporate taxes to help small businesses grow and to tackle tax avoidance to fund some of their policies. 10P TAX SIDE-EFFECTS The party’s plan to introduce a lower 10p starting rate of

income tax is geared toward reducing the amount of tax paid by the lowest earners in society. Labour has said it will paid for it by abolishing the Marriage Allowance. This proposal poses a

distort the economic incentive to live in a marriage or civil partnership. However, it will remove the disincentive for married couples to move to the top income tax threshold, or for the

other half of the couple to start working. While it is understandable that Labour is trying to propose a redistribution of wealth across two groups of taxpayers, the fairness of the proposal

is not adequately addressed in the manifesto, and no details are provided on how much redistribution is projected and how it will affect the disposable income and standard of living of the

two groups of taxpayers. INCENTIVE PROBLEMS The top rate of tax will also be increased from 45p to 50p for people earning over £150,000. Again, the idea is that the tax burden will be

shifted to wealthier sections of society. Research shows this reform could create serious problems of incentive and tax avoidance. Increases in tax for top earners mean that taxpayers who

have the highest productivity will be hurt, and will see no incentive to remain at the highest productivity level. It will also destroy the incentive for others to be more productive and

move to higher income levels. The highest earners also have the best ability to afford tax avoidance, and therefore this may add to the worries of tax collection and tax compliance Britain

already has. Overall, this reform therefore is unlikely to boost growth in government revenue. Similarly, the party’s plans to abolish the tax breaks used by hedge funds and abolish non-dom

status are geared toward raising revenue and paying for various policies. But their ability to raise the amount they hope from these measures is uncertain. The removal of the tax breaks for

hedge funds and the bank bonus tax will put banks into more financial stress and it is likely that banks will either find ways to avoid their new tax liabilities or increase their fees –

either will incur additional costs for the economy. Similarly, reaping the benefits of abolishing non-dom status is questionable. MIXED BENEFITS FOR BUSINESS For businesses, Labour proposes

to keep the corporate tax rate for larger firms unchanged and aims to foster the growth of small businesses by cutting the current business rate, so they can commit to longer term

investment. The promise to freeze the lower business rate is likely to remove any uncertainties small business might have before committing to any new investment plans, which is important

for encouraging growth. The reduction in business rates will mean a loss of revenue, however, which the party does not make clear how they plan to recover. If the projection is that the new

business rate will encourage more people to start new business, the incentive does not appear to be sufficient, because little detail is provided on how the party wants to help new starters

with the funding for initial investment. BETTING ON THE LONG GAME Labour’s plan to cut the deficit and boost productivity-led growth in Britain require a huge amount of resources to be

allocated with immediate effect. But some of its tax reforms are slow yielding, while the revenue potential of the others cannot be assessed without further details. And the manifesto does

not present sufficient details on how Labour wants to tackle the problems of tax avoidance and tax evasion. With no major changes in the income tax system, and with more VAT exemption and

cuts in business rates, it remains unclear how the government can finance its proposed expensive long-yielding projects. These uncertainties pose serious questions on the feasibility of

Labour’s plans and open the possibility of larger public debt in near future for the UK. Given the current debt burden and the associated deficit in public budget, any further debt for the

UK can be lethal. _The Conversation’s Manifesto Check deploys academic expertise to scrutinise the parties’ plans._