BRITISH TAX POLICY 1979-90 - EQUITY AND EFFICIENCY

The Conservative government in Britain in the 1980s was regarded as a tax reforming administration. 'Tax reform' is short-hand for efficienc y in taxation which requires low rates on a wide base. There is a view that economic performance was improved, though at the expense of equi ty. This paper gives an account of the changes which took place and as sesses their effects on both efficiency and equity. It finds that taxe s became more regressive but that it is unlikely that there were any l arge efficiency gains. This is because though the rates of some taxes (especially income tax) were reduced, others were raised and, apart fr om corporation tax, tax bases remained the same or were narrowed. In p articular the income tax base was made narrower by the introduction of new reliefs and the growth of old ones. Such changes are bad for both equity and efficiency.