The Treasury Committee has called for an increase in corporation tax to address the “unsustainable public finances”.
The group of MPs said now was not the time for tax rises or fiscal consolidation, but said raising taxes was probably needed in the future.
The report called for a “moderate increase” in corporation tax from its current level of 19%.
Corporation tax made up 6% of total tax receipts in 2019/20. An increase of one percentage point would bring in an estimated extra £2bn in the first year alone, said Deloitte international tax partner Zubin Patel.
The MPs also said stamp duty land tax was “economically inefficient” and should be set at a level that optimises revenue while encouraging home ownership.
The report also recommended that the government introduce a temporary three-year loss carry-back for trading losses.
This would allow losses made during the pandemic to be set against up to three previous year, generating a tax refund.
The committee said the introduction of a windfall tax on profits that have resulted from the pandemic would be “problematic” but not impossible if that political choice was made.
One of the issues with a windfall tax raised by the committee would be deciding which sectors it applied to.
The report also called for the reform of pension tax relief which it said was estimated to cost £20.4bn in 2018-19.
Mel Stride MP, the committee chair, said: “With our public finances on an unsustainable long-term trajectory, our clear message is that Budget 2021 is not the time for tax rises or fiscal consolidation, which could undermine the economic recovery.
“But we will probably need to see significant fiscal measures, including revenue raising, in the future.”
The Treasury was contacted for comment.
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