Labour can’t rely on proposed tax increases, UK think tank warns

While both of the UK’s major parties failed to address long-term challenges in their general election manifestos, Labour’s tax proposals cannot be relied on because of a combination of errors and overoptimistic assumptions, according to the Institute of Fiscal Studies (IFS).

“The shame of the two big parties’ manifestos is that neither sets out an honest set of choices,” IFS Deputy Director Carl Emmerson told a London press briefing on May 26. The Labour Party would raise public spending to its highest level since the mid-1980s and increase taxes to “record levels in peacetime,” while the Conservative and Unionist Party would preside over “yet more spending cuts alongside a modest increase in the tax burden,” he said. Read more:

My news story for Tax Analysts, May 30 (paywall)

Tax complexity again – or ‘What they did to section 6’

The main rates of income tax are introduced in section 6 of the Income Tax Act 2007, with references to the detailed rules elsewhere.

That section, as it stood before Finance Act 2017 (passed three weeks ago) and as presented in Tolley’s Yellow Tax Handbook online, is on the left hand side of the picture below.

The original version, according to legislation.gov.uk, is on the right. And this is only part of the story, and devolution of rate setting powers will continue to add complexity …

Main rates

Tax advisers (and writers) can charge fees for keeping on top of this sort of stuff, but it’s not always cost effective. And this complexity is not good for taxpayers.

Related: It is important that people understand how the tax system works

UK business group calls for tax planning ‘white list’

The next UK government needs to accept that there will always be tax competition between countries, and that “authentic tax planning arrangements” should be accepted and encouraged, according to the Institute of Directors.

The IoD supports global initiatives to combat “aggressive tax abuse and avoidance,” it said in a May 11 release. But a tax planning white list would reduce confusion and encourage genuine investment decisions and transactions by “removing unnecessary or perceived tax risks,” it said in a budget submission to HM Treasury in January.

Read more, including details of pre-election representations from CBI, BCC, BRC and EEF:

My news story for Tax Analysts, May 13 (paywall)

General election: A summary of tax-related pledges in Labour’s draft manifesto

This is a brief summary of the tax-related pledges set out in the leaked draft manifesto. That draft has been amended today, and the amended manifesto “unanimously agreed”, BBC News has reported.

Labour would seek to “eliminate the current budget deficit within five years” but would borrow to invest for future economic growth.

It would “rule out rises in income tax for those earning below £80,000 a year, on personal national insurance contributions, and on VAT”. Ninety-five percent of taxpayers would be guaranteed no increase in income tax rates, and “everyone would be protected from any increase in personal NICs and VAT”.

A Labour government would “ask large corporations to pay a little more” corporation tax, while keeping the headline rate among the lowest of the major economies. (The party has announced that it would increase the rate for large companies from 19% to 26% by 2020, see Critics cast doubt on Labour plan to increase UK corporation tax rate.) Continue reading General election: A summary of tax-related pledges in Labour’s draft manifesto

Critics cast doubt on Labour plan to increase UK corporation tax rate

A Labour government would create a national education service, providing increased funding for schools and colleges by reversing cuts to headline rates of corporation tax, the party announced …

Labour’s proposal is nonsensical, Conservatives said. The main corporation tax rate was reduced from 28 percent in 2010 to 19 percent in 2017. A small profits rate of 20 percent, applying to companies with profits of up to £300,000, was abolished in 2015 when the two rates merged.

Labour said it would increase the main rate to 21 percent in 2018, 24 percent in 2019, and 26 percent in 2020, adding that 26 percent would be the lowest rate in the G-7. A small profits rate would be set at 20 percent in 2018 and 21 percent in 2020 …

My news story for Tax Analysts, May 11 (paywall)

UK tax and development agencies seek to ‘galvanise’ capacity building efforts

A high-level roadmap for revenue reform in developing countries over a period of four to six years will help ensure that external support is coordinated rather than fragmented, but the strategy’s core elements must include social consensus, according to UK tax and development agencies backing the Platform for Collaboration on Tax.

The stated goal of a closed event held in London on May 4 was to “focus and galvanise” international efforts to raise tax revenues in partner countries. The event was hosted by the UK’s Department for International Development, HM Treasury, and HM Revenue & Customs in partnership with the platform, an initiative announced last year by the IMF, OECD, World Bank, and United Nations. Read more:

My news story for Tax Analysts, May 6 (paywall)

 

Scottish budget process needs improvement, tax body says

The Scottish Parliament should consider setting up a new parliamentary committee to scrutinise Scotland’s tax legislation, the Chartered Institute of Taxation said amid concerns about the quality of public debate and the impact of business incorporations on tax revenues.

The Parliament now has powers to raise and allocate revenue but needs to recognise constraints posed by the limited devolution of tax powers, CIOT noted in an April 27 submission to a budget process review group set up by the Parliament’s Finance and Constitution Committee … The quality of public understanding and engagement with the tax system is quite low, making it difficult to have a sensible public debate about possible options, CIOT argued.

While Scotland is being given devolved taxation powers, it is “not being given the data on which to make decisions,” Richard Murphy, tax campaigner and professor of practice in international political economy at City, University of London, told committee last month. Read more:

My news story for Tax Analysts, May 5 (paywall)

Scottish approach to taxation: FCC hearing, April 19

New government must set out roadmap for equalising NICs, says Work and Pensions Committee

Bogus self-employment in the gig economy is passing the cost of providing safety net support to the welfare state and leading to a substantial loss of tax revenue, a UK parliamentary committee said as it revealed a wide range of practices that “seemed to blur the line” between employment and self-employment.

The House of Commons Work and Pensions Committee’s inquiry into self-employment and the gig economy, launched in December 2016, was cut short by the prime minister’s decision to call a general election. How the welfare state adapts to a changing labour market is “one of the great issues of our time,” the committee said in an abridged report published on May 1.

My news story for Tax Analysts, May 3 (paywall)

UK enacts new tax evasion offence to hold employers accountable

In light of a new offence of failure to prevent the facilitation of tax evasion, UK tax professionals said that financial institutions will need to review their procedures, while campaigners called on the next government to increase pressure on overseas territories in relation to tax transparency.

The Criminal Finances Act, passed on April 27, will give law enforcement agencies further powers to recover the proceeds of crime; tackle money laundering, tax evasion, and corruption; and combat the financing of terrorism …

An amendment proposed by the government and passed by the House of Lords before enactment requires the government to report to Parliament by July 2019 on the effectiveness of bilateral arrangements between the UK and both the crown dependencies and overseas territories on sharing of beneficial ownership information …

An amendment calling on the government to increase pressure on the territories to introduce public registers was not taken to a vote. Read more:

My news story for Tax Analysts, May 2 (paywall)