Treasury officials call for tax hikes
The Sunday Telegraph’s Harry Yorke reports that Treasury officials are pushing for tax rises to help boost public finances hit by the coronavirus crisis, with Downing Street said to be resisting moves that could see the Exchequer pull in an extra £20bn a year. Sources tell the paper that proposals under consideration include aligning capital gains tax with income tax and cutting pension tax relief, with the introduction of an online sales tax and simplification of the inheritance tax system also mooted. Mr Yorke says that while Downing Street may not be opposed to some tax rises, especially the closing of perceived loopholes for the wealthiest in regard to capital gains and pensions, those around the Prime Minister fear a major tax raid risks derailing the economic recovery. He adds that senior Downing Street figures would rather reduce spending, with senior economists and business leaders also against increasing taxes, saying Chancellor Rishi Sunak’s focus should be on stimulating growth. Paul Johnson, director of the Institute for Fiscal Studies, says tax rises will be needed “eventually” but it is unlikely they will be rolled out soon due to uncertainty over the state of the economy. Elsewhere, the Sunday Times reports that Mr Sunak is planning a “£30bn tax raid” in November’s Budget, saying increases in capital gains tax and corporation tax are on the cards, with the latter possibly jumping from 19% to 24%.
Business groups question tax increase plan
Following reports that the Chancellor could be looking to raise taxes to help cover the cost of the coronavirus pandemic, business groups have spoken out, with Adam Marshall, director general of the British Chambers of Commerce, saying: “Raising the tax burden on business and entrepreneurs before they have a chance to recover could create serious issues for the trajectory of the UK’s overall recovery.” Mike Cherry, national chairman of the Federation of Small Businesses, said: “Given we’re in a recession the last thing policymakers should be doing is hiking taxes on those we need to invest, create jobs and generate growth over the crucial months ahead.” Matthew Lesh, head of research at Adam Smith Institute, urged the Government to “get its own house in order” by cutting spending before increasing taxes, while Institute for Fiscal Studies economist Stuart Adam believes that “in the short run the Government should probably be looking to cut taxes and increase spending.” Paul Johnson of the Institute for Fiscal Studies, said: “I think we should be looking probably initially at a couple of years where the Government is supporting the economy and only really when the recovery is fairly clearly underway and the economy is getting back closer to normal will we be looking at tax rises.”
Source The Daily Telegraph (31/08/2020) The Daily Telegraph (31/08/2020) The Times (31/08/2020) Financial Times (31/08/2020) Daily Mail (31/08/2020) The Guardian (31/08/2020) The Independent (31/08/2020)
Tax dodge informer payouts hit £473k
Analysis by law firm RPC shows that HMRC payments to those tipping off the tax office about tax dodgers has increased, with informants paid £473,000 in the 12 months to April 2020 – up from £290,250 in the same period the year before. HMRC is currently investigating 30 cases, with more than a third relating to the financial services sector. Businesses are required to have reasonable prevention procedures to stop their employees facilitating tax evasion. Meanwhile, separate analysis shows that there has been a 10% increase in the number of whistleblowing reports about potential tax evasion, with HMRC receiving 73,000 tip offs in the year to March 31 compared to 66,000 in the previous year. Tighter rules ensuring accountants and other advisers report all possible cases are believed to have contributed to the increase.
Source The Sunday Times (30/08/2020) The I (01/09/2020) Daily Mail (01/09/2020)
Labour urges Chancellor to push ahead with tech tax
Labour has told Chancellor Rishi Sunak to push ahead with a levy on technology giants, with shadow chancellor Anneliese Dodds voicing concern over reports that the digital services tax may be axed because it could jeopardise a post-Brexit trade deal with the US. Ms Dodds said: “This government promised to make tech giants pay a fair share of tax to support our public services. Scrapping the digital services tax will do the opposite, costing millions in revenue that could pay for thousands of nurses, teachers or police officers.”
Source The Guardian (31/08/2020)
Small firms at risk as landlords refuse to compromise
Business bosses have warned that their firms are at risk because landlords are unwilling to negotiate on rent. Mike Cherry, chairman of the Federation of Small Businesses, has urged ministers to consider measures to protect small companies that are close to collapse “because their rent is too high and landlords won’t compromise”. Mr Cherry, who says many small firms have long leases, argues that it is “wrong for otherwise-viable small businesses to go under just because they’re tied into paying high rents that their landlords would not be able to charge new tenants in the current climate”. Meanwhile, Labour MP Stella Creasy has told Housing Secretary Robert Jenrick that she has received complaints about landlords taking public subsidy for their own businesses while continuing to charge their tenants full rent. Melanie Leech, chief executive of the British Property Federation, argues that a number of small landlords who rely on property as their only or main source of income are being put at risk by “large, well-capitalised tenants who are refusing to meet their rental obligations”.
SMEs look to cut costs
A survey by Hitachi Capital Business Finance shows that 61% of SMEs are looking to cut costs, up from 39% at the start of the year. The number of smaller firms targeting cashflow improvements as a priority rose from 22% to 32%, while those reviewing their borrowing commitments nearly doubled to 21%. Hitachi Capital managing director Gavin Wraith-Carter said more business owners are treating these issues as top priorities, adding: “Many are making important decisions on reshaping their business so they can compete in the new economic climate.” The poll also saw 27% of SME owners say they have had a positive third quarter, compared to 14% in Q2.
Source Sunday Express (30/08/2020)
BoE data fuels hope of V-shape recovery
Bank of England (BoE) figures for July have raised hopes that the economy may be heading toward a V-shaped recovery, with borrowing on the up. July saw households borrow an extra £1.2bn in personal loans and credit card debt – more than the average £1.1bn seen in the 18 months to February. Credit card borrowing hit £622m during July, the highest rise in a single month since June 2018, while mortgage approvals rose 26,000 over the month to 66,300, with £2.7bn in new mortgage borrowing. The BoE report shows that lenders have put up the cost of consumer loans amid economic uncertainty driven by the coronavirus crisis, with the cost of new loans up by 0.22 percentage points to 4.64% in July and overdraft charges rising by 1.6 percentage points to 14.84%. The figures reveal that households saved an extra £7bn in July, an increase on the £5bn average seen pre-pandemic but down on the £19.1bn recorded at the peak of the crisis. Companies saved an extra £11.8bn during July as overall deposits rose by £26.3bn.
£500bn hit from home-working
Analysis suggests £480bn could be wiped off the economy over the next four years if workers fail to return to offices, with Douglas McWilliams, deputy chairman of the Centre for Economics and Business Research and a former chief economic adviser to the Confederation of British Industry, saying the economy will not return to its pre-pandemic size until 2025 if home-working continues in its current form. With a number of firms saying some staff may never return to the office full-time, Mr McWilliams has warned that a broad shift to remote working could hit the economy as it would leave a hole in economic activity generated by commuting and socialising, with large numbers of small businesses in town and city centres relying on income from staff and professionals.
Source The Mail on Sunday (30/08/2020)
School return set to boost economy
With schools reopening this week, analysts have said the economy could be set for a £70bn boost, with children returning to the classroom full-time enabling more parents to return to the office. The Centre for Economics and Business Research (CEBR) said that with as many as 5% more employees set to return to their workplaces, GDP could climb by more than 3%, with productivity boosted and the hospitality sector given a lift by workers returning to cafes, sandwich bars, pubs and restaurants. The CEBR says that measured GDP could be 3.3% higher, which equates to roughly £70bn a year.
Source Daily Express (01/09/2020)