The potential level of government borrowing during the current crisis is impossible to predict and will ultimately depend on the unknown timing and extent of the virus and its ultimate long term economic impact. However, what is known is that borrowing will increase to levels not seen since the Second World War and potentially in economic history. Some commentators have predicted a mind boggling increase in UK government debt of £500bn - more than 25% of GDP and more than the total level of Government debt pre the financial crisis in 2008.

In real life we assume debt needs to be repaid, and over a specific term. Socially and economically austerity is unlikely to return soon, and even Boris has eluded to this. The only other lever, if the debt is to be reduced and ultimately repaid, is to raise taxes. Taxes are currently around 33% of UK GDP and any large increases will drag on the economy, stifling growth.

With Covid-19 being a global problem, I think there will be an acceptance that increased long term government debt is the new normal. We saw this through the financial crisis, where government debt around the world increased dramatically, including in the UK where it increased to nearly 100% of GDP.

With no return to austerity and continued loose fiscal policy, aimed at aiding the recovery, we could see UK government debt rise to 150% of GDP and potentially beyond if Covid-19 is here to stay. Thankfully, historic low interest rates mean this is affordable. With the UK government currently borrowing at sub 1% rates, interest on £500bn is only a few £bn a year.

We may ultimately see quasi-permanent quantitative easing - "people's QE" (broadly governments electronically printing money with no real plan to unwind) - an approach which would normally be unacceptable to the markets and drive inflation, but could provide the world the get out of jail free(ish) card.

Therefore, I don't think we will see wholesale tax rate rises. However, the government will look even harder at how to make the tax system fairer, drive the right behaviours and ensure that those that can afford it pay a higher (fairer) share. With this as background, my thoughts on potential future UK tax changes are :

1) No short to medium term increases in the "Big 3" taxes, VAT, Income Tax and NIC (on employees/employers), which account for about 60% of UK tax revenue. If the recovery in consumer spending is strong and sustained there could be increases longer term though as we accept higher taxes to pay for a bigger state (the books will need to be balanced at some point)

2) Increase in NIC for the self employed to remove the anomaly between employed and self employed. Rishi Sunak has already alluded to this in providing government support for the self employed. To fully align with the total cost of NIC for employees (i.e including employers NIC), this could increase the tax rate on the self employed by c.10%.

3) Measured and targeted increases in corporation tax - either through increasing the tax base (taxing more) or small increases in the rates. Taxing more will include further reductions in reliefs and allowances and, socially more important, ensuring multinational and technology companies pay their fair share in the UK, specifically an acceleration of digital services tax Ultimately, corporation tax only accounts for C.7% of total UK tax take so even major increases have limited impact and it is key the UK remains competitive in attracting internationally mobile corporations, especially with the advent of Brexit.

4) An increase in capital gains tax (CGT). I think the government may come under pressure from the fact wealthy individuals pay a lower rate of tax on a capital gain (20%) than a nurse does (potentially 40% when including all NIC). However, it is key this does not stifle "good investment" which creates economic wealth and employment- i.e. entrepreneurs wanting to build and, when the time is right, exit their businesses. We could see a return to multiple rates of CGT, with capital gains on non business assets being taxed at marginal income tax rates (like it used to be).

5) Transformation of the inheritance tax (IHT) system. The Office of Tax Simplification has already carried out a detailed review and made various recommendations to make IHT simpler and fairer (see OTS IHT Link which is well worth a read). This could see restrictions in the current reliefs for certain assets related to businesses and agriculture and changes to taper relief (where certain gifts made prior to death are not taxed or taxed at lower rates).

The report alludes to the potential to replace IHT with a lifetime gift tax, which a number of other G7 countries have. If society is looking for a fairer tax on "passing on wealth" this is likely to get increased attention. More radical commentators have suggested all transfers of wealth should be taxed at income tax rates. I would have serious concerns this would drive wealth and wealth creators offshore bringing long term damage to the UK.

6) Even more focus on tax evasion, with technology and social conscious driving down the black economy. It will be interesting to see the impact of Covid-19 on the black economy, which has potentially affected activities more likely to be in the black economy and accelerated a move away from cash payments. Also those who have not reported previous taxable income will not have been supported under the government income protection schemes!

7) Continued widening and strengthening of anti-avoidance rules and the naming and shaming of those who don't abide by the rules. I have seen a dramatic and welcome shift in the attack on aggressive tax planning and schemes during my career. Naming and shaming, either by government, public interest organisations or the media, is likely to be even more widespread and damaging to brands going forward (we are already seeing movements to buy British, buy local, support your local coffee shop etc).

8) Widening and increasing green taxes - both from a necessity to hit CO2 emissions and a potential societal mindset change that global crises need to be taken seriously and averted. The key to this is that green taxes and matched with green incentives.

Conclusion

Overall, we could see a once in a lifetime shift in tax policy - the government has a justification to take previously unwelcome steps on the basis we are all in this together, with a wider acceptance of the importance of a bigger and better funded public sector. Everyone paying their "fair share" towards this will be critical. Not being perceived as doing so could be damaging to brands and goodwill, with inappropriate and aggressive tax planning being extremely damaging. We may see wider open disclosure of tax affairs - either by regulation or because it becomes a natural part of a businesses CSR.

What is key is that any changes do not stifle entrepreneurs who start, build and run the businesses that employ and create the wealth that ultimately pay our taxes. We should cherish wealth creators and successful entrepreneurs. Businesses and business owners with a social conscious and a commercially driven, rounded and sensible approach to managing their tax affairs will be those who thrive.

As always I welcome views and comments on my thoughts.