Britain behind on tax competitiveness
Analysis by the Tax Foundation places Britain 22nd among the Organisation for Economic Co-operation and Development’s 36 advanced nations in regard to tax competitiveness. The think-tank places Britain 33rd on property taxes, 17th for corporation tax and 24th on income taxes. The analysis, a joint report put together with the Centre for Policy Studies, says tax rises reportedly being considered by the Treasury would take the country from 22nd to 30th in the headline index, with the Chancellor said to be weighing increases in corporation tax and capital gains tax to balance the books amid the COVID-19 pandemic. The Centre for Policy Studies has warned Rishi Sunak against increasing taxes in the middle of the coronavirus crisis and ongoing Brexit uncertainty, with its head of tax Tom Clougherty saying: “Trying to close the fiscal gap now … would be an act of self-sabotage.”
Source: The Times (14/10/2020) Daily Mail (14/10/2020)
IFS: £40bn a year tax rises needed to stop debt ‘spiralling’
The Institute for Fiscal Studies (IFS) says the Chancellor will need to raise taxes by more than £40bn a year by 2025 to balance the books and “stop debt spiralling out of control”, with government borrowing set to hit £350bn this year. The IFS’ Green Budget suggests ministers should take advantage of cheap borrowing costs to provide further support to the economy for at least 18 months. The report says the Government has increased spending on day-to-day public services by £70bn in response to the pandemic, adding that even if three-quarters of that was to stop this year, it would still add £20bn to public sector borrowing by 2024/25. IFS director Paul Johnson said: “Tax rises, and big ones, look all but inevitable, though likely not until the middle years of this decade.”
Tories set to rebel over plans to hike taxes for self-employed
Backbench Conservative MPs are planning a rebellion over Treasury moves to increase taxes on the self-employed to bring them in line with normal employees. One Tory MP said: “Self-employed workers have had a pretty rough deal and the idea that [the Chancellor] would now choose to make it even tougher for them seems perverse. Most people do not like the Treasury’s continual and institutional obsession with increasing tax on self-employed people.” Rishi Sunak was also criticised this weekend for failing to provide self-employed workers with extra support during local lockdowns. “Local lockdowns will affect many self-employed people just as much as employees, but as it stands they have much, much less support available to them,” said Andy Chamberlain, director of policy at IPSE.
Stamp duty holiday set to save homeowners £500m
Research from the estate agency Benham and Reeves shows 85% of homebuyers have paid no tax on their newly bought property as a result of the Chancellor’s stamp duty holiday. However, the figure excludes properties bought as buy-to-lets and homes bought in September. Land Registry figures reveal the stamp duty holiday cost the Treasury £100m in July and August. Marc von Grundherr, a director at Benham and Reeves, estimates that the total sum could be as large as £524.9m.
Source: The Times (09/10/2020)
Government under pressure over VAT decision
The Government remains under pressure to reverse its decision to pull out of the VAT Retail Export Scheme, which was announced last month and will mean an end to overseas visitors reclaiming 20% VAT on items including handbags, clothes and watches. Both Harvey Nichols and Selfridges have warned of the severed impact on businesses across the country by the removal of the scheme. About £28.4bn was spent by overseas tourists in Britain last year, with £2.5bn reclaimed as tax-free shopping, according to the Centre for Economics and Business Research.
Source: The Times (10/10/2020)
Self-employed face tax bills higher than their income
Freelancers whose income has been slashed this year due to the pandemic could soon face tax bills higher than their earnings, the Mail reports. Because self-employed workers pay a biannual tax in advance based on their previous income, someone on £50,000 before the pandemic would owe around £16,682 in tax, even if their income was £15,000 this year, according to analysis by Royal London.
Source: Daily Mail (12/10/2020)
FSB chair: Tier system will deliver disruption
Writing in the Express, Mike Cherry, national chair of the Federation of Small Businesses, says the new three-tier system for deeming a region’s coronavirus risk “will mean huge disruption for firms.” He says the system will only work if funding for business support and guidance to accompany it is “sufficient, crystal clear and timely”. He adds that “far too many” people are excluded from the Government’s efforts to help business owners, including company directors and the newly self-employed, adding that a rescue package for such groups is “urgently needed”. Mr Cherry says a world beating test-and-trace system is central to getting the small business community “firing on all cylinders again”, insisting that the sooner one is in place, “the sooner our economy can bounce back”.
Source: Daily Express (13/10/2020)
A fifth of SME owners working extra three hours daily
New research from Aldermore Bank reveals that one in five (21%) SME owners are working an additional three hours daily on average to manage the impact of the COVID-19 pandemic on their business. Many SME owners reported that longer working hours meant they had to make personal sacrifices, such as reducing time spent relaxing (37%), quality time with family (32%), and exercising (20%). 43% of SME owners described themselves as being “stressed or anxious” due to the pandemic. The main causes of the increased time SME directors spent working included: spending more time serving existing customers (27%), working to reduce anxiety about the business’s future (21%) and pursuing more new business opportunities (19%).
Source: Business Money (07/10/2020)
IMF: COVID-19 will cost global economy $28trn
The International Monetary Fund (IMF) has warned that the COVID-19 pandemic will cost the global economy $28trn (£21.5trn) in lost output by 2025. The IMF said a stronger than expected performance in Q2 and Q3 means global output is likely to fall by 4.4% in 2020 compared with the 5.2% drop forecast in June. However, the organisation said that rising infection rates in some emerging market economies had forced it to pare back its estimate of the rebound in 2021 from 5.4% to 5.2%. For Britain, the IMF predicts the economy will decline by 9.8% this year, less than the 10.2% forecast in the summer. For 2021, the IMF expects Britain to see a recovery of 5.9%.
BoE asks banks if they are ready for negative rates
The Bank of England (BoE) has asked banks how ready they would be for the rollout of negative interest rates, with deputy governor Sam Woods writing to commercial lenders asking what steps they would need to take if borrowing costs were pushed to 0.00001% or below zero. Mr Woods, head of the Bank’s Prudential Regulation Authority, called on banks to offer “specific information” on their “current readiness to deal with a zero bank rate, a negative bank rate, or a tiered system of reserves remuneration”. Meanwhile, BoE governor Andrew Bailey has said the coronavirus crisis means negative rates should be considered as part of its “tool kit” but that did not mean they would be used by the Bank.