Rebecca Reading: What can we expect from the forthcoming Budget?
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Rebecca Reading, Baker Tilly
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WE at Baker Tilly conducted a survey recently on what people really want to see in the Chancellor’s Budget on March 19 and discovered that the taxation of multinationals is still at the top of the agenda. The survey found that making sure global businesses pay their fair share of tax should be George Osborne’s number one priority, with 35% of respondents rating this as what they would most like to see. Reducing employers’ National Insurance to create more employment opportunities was also a popular choice, followed closely by cracking down on off-shore tax evaders. Between them these three measures received just short of 80% of the votes cast. Reinstating the 50p rate of income tax for high earners, as put forward by Shadow Chancellor Ed Balls recently, received little support, with only 6% of the votes. I thought this was a really interesting outcome. The 50% tax band was a flagship tax policy for Labour back in 2010, and was thought to have popular appeal. Looking back on the three years it was in force, there is some evidence that it did not raise that much in terms of additional tax revenues. The survey results seem to indicate that people are sceptical about income tax rates over 50%; the rate being 52% when you take into account the 2% additional National Insurance at these levels of income. Perhaps people believe that high earners use tax planning to avoid paying the additional tax or cynically see the 50% rate as more of a political vote winner rather than robust fiscal policy. So, with next year’s General Election looming, and an income tax increase looking like a political non-starter, what about corporation tax? Arguably, having already announced the future 20% rate from 1 April 2015, an increase here is equally unlikely and would send the wrong message to business. We are already starting to see increased interest from multinational businesses attracted to the UK by the low tax rate, indicating that this policy is proving successful, and contradicting the popular assumption that big business avoids UK tax. With news that the economy is starting to show solid signs of recovery, the forthcoming Budget will give a strong indication of how confident the Chancellor is overall that his tax and spending plans are the right ones. Suggesting that he will keep the austerity plans in place, George Osborne said this week: “Abandon the plan and we abandon the progress we’ve made and go back to square one.” Nevertheless, with things improving here, perhaps the pressure will be off as far as the global tax avoidance debate is concerned? Mr Osborne may simply confirm the UK Government’s support for the OECD’s on-going Base Erosion and Profit Shifting project, which continues to make steady progress with the release of several further consultations documents over the last few weeks. Baker Tilly is holding a live debate on Budget day, at which a panel of regional tax experts will address what the Chancellor’s statement means for taxpayers in our region. More articles in
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