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According to think-tanks, a massive reform to taxes is required to tackle rising unemployment levels and stimulate business growth, in order to boost the economy. A report which has been published by the Centre for Policy Studies, calls for employment taxes to be reduced in order to encourage the unemployed into work and increase growth of the economy. At present, the slow growth of the UK economy is a huge threat to the government’s targets for the reduction of the public deficit.

Similar demands are being made by the Organisation for Economic Cooperation and Development, who want to encourage creation of new jobs by giving businesses tax breaks. They have also called for increased tax credits which would increase the income levels for low paid workers who are struggling.

Ryan Bourne, CPS economist states that it is crucial that the message both in the UK and overseas is for the growth of the economy. Bourne has proposed that £14bn should be utilised to reduce taxation for businesses and workers. He suggested that this could be funded by reducing the international aid budget and through pensions reform. Calls are also made for the reduction of Corporation Tax to 21 percent, and the reduction of National Insurance to 12 percent. Personal allowances also came under the spotlight, with a suggestion to increase them to £10,500 which is £500 more than the target currently suggested by the government.

The OECD said:

“These tax burdens discourage employers from hiring. They also reduce the incentives for the unemployed to look for a job, and for those in employment to work longer or harder.”

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