What’s next – a Twitter tax?

SOCIAL media and other technological developments could be the subject of new taxes as the new government looks to find innovative ways reduce the massive deficit, accountant RSM Tenon has warned.

The company said the new government would have to be creative to generate the money it needed to bring debt levels under control as soon as possible as spending cuts alone would not be enough to reduce the burden.

It said that as businesses continued to pioneer creative new and innovative practices to maintain market position, new taxes could emerge adapting the UK tax system to technological developments over the next decade.

The firm said this had been seen in the past when additional tax was levied on colour TV owners while recent speculation about a possible broadband tax was further evidence of intent.

RSM Tenon said that trawling the archives suggested governments had always looked at latest trends as possible revenue generators with past taxes being levied on hats, windows and even facial hair.

Rob Gunn, director of tax at RSM Tenon in Birmingham, said: “In 1874, the government introduced a tax on hats. Retailers were forced to apply for licenses and stick tax-revenue stamps pasted into the linings.

“The assessment and collection of hat taxes became so complex that the government codified a legal definition of a hat in 1804.  Whilst looking overseas, in 1705 Peter the Great levied taxes on men with beards across Russia.

“More recently, taxes on cow flatulence have been discussed in several European countries, including Ireland and Denmark, which could leave a farmer as much as $118 per cow out of pocket.”

TwitterHe added: “The emergence of new taxes cannot be ruled out as desperation over the government debt gains momentum – a twitter tax, mobile phone tax or social networking tax would come as no surprise to me.”

Traditional tax changes such as raising the basic rate of income tax are unlikely to be election winners, he warned.

A 1% increase in income tax would raise an additional £3.4bn and raising VAT to 20% would generate £10-12bn but Mr Gunn said neither initiative was likely to be considered this year.

“On a serious note entrepreneurs may be resilient but they are the lifeblood of our economy and need support from the government in order to stimulate growth to plug the deficit.  

“Whichever party leads the next government, businesses want a simple, fair and stable tax system where they can operate with certainty,” he said.

“They want an environment where there are incentives to invest and grow businesses and where there are no hidden taxes.”