The Labour Party has published its manifesto for the 2017 general election campaign, containing a raft of headline-grabbing taxation proposals (http://bit.ly/2qrrnpu). These include:
income tax rate of 50p on earnings above £123,000;
income tax additional rate of 45p on earnings of £80,000 and above;
raising corporation tax to 21% from 2018/19, to 24% from 2019/20, and to 26% from 2020/21;
These measures, it is claimed, would raise additional tax revenues amounting to £48.6bn, comprised of £6.4bn in income tax from the top 5% of earners, an extra £19.4bn from corporation tax and £6.5bn from the ‘tax transparency and enforcement programme’ to tackle tax avoidance. Specific anti-avoidance measures include:
preventing managers of private equity companies from treating carried interest as a capital gain rather than as income;
preventing UK companies exploiting withholding tax exemptions on Eurobonds listed on the Channel Island Stock Exchange;
clamping down on umbrella companies;
introducing a general presumption against HMRC offering advanced thin capitalisation agreements;
public filing of the tax returns of individuals earning more than £1m; and
public filing of large company tax returns.
This programme would also involve an additional £200m of funding for HMRC to restore staffing numbers.
On the relieving side, the proposals include:
no increases in employee NICs or the rate of VAT;
reinstating the small companies’ rate of corporation tax (on profits below £300,000) to 20% from 2018/19 and 21% from 2020/21; and
exclusion of businesses with a turnover below £85,000 from ‘making tax digital’ quarterly reporting.
Paul Johnson, director of the Institute for Fiscal Studies, was sceptical about whether it would actually be possible to raise such ‘very, very large increases in taxes’ from companies ‘which would likely reduce the amount of investment that they do’. Johnson commented that the proposed increases would take the tax burden to its highest level in 70 years.
The IFS has also pointed out that Labour’s confirmation that it has no plans to reform pensions tax relief will open the way for individuals to avoid the income tax rises by increasing their pension contributions.
Jason Collins, tax partner at Pinsent Masons, pointed out that while the manifesto rules out any increases in ‘personal’ NICs, this ‘leaves the door open’ to a possible rise in employer’s NICs.
Dr Adam Marshall, director general of the British Chambers of Commerce, while welcoming specific measures that could benefit SMEs, thought that business leaders would see these as ‘largely eclipsed’ by higher personal and business taxes.
The Labour Party has published its manifesto for the 2017 general election campaign, containing a raft of headline-grabbing taxation proposals (http://bit.ly/2qrrnpu). These include:
income tax rate of 50p on earnings above £123,000;
income tax additional rate of 45p on earnings of £80,000 and above;
raising corporation tax to 21% from 2018/19, to 24% from 2019/20, and to 26% from 2020/21;
These measures, it is claimed, would raise additional tax revenues amounting to £48.6bn, comprised of £6.4bn in income tax from the top 5% of earners, an extra £19.4bn from corporation tax and £6.5bn from the ‘tax transparency and enforcement programme’ to tackle tax avoidance. Specific anti-avoidance measures include:
preventing managers of private equity companies from treating carried interest as a capital gain rather than as income;
preventing UK companies exploiting withholding tax exemptions on Eurobonds listed on the Channel Island Stock Exchange;
clamping down on umbrella companies;
introducing a general presumption against HMRC offering advanced thin capitalisation agreements;
public filing of the tax returns of individuals earning more than £1m; and
public filing of large company tax returns.
This programme would also involve an additional £200m of funding for HMRC to restore staffing numbers.
On the relieving side, the proposals include:
no increases in employee NICs or the rate of VAT;
reinstating the small companies’ rate of corporation tax (on profits below £300,000) to 20% from 2018/19 and 21% from 2020/21; and
exclusion of businesses with a turnover below £85,000 from ‘making tax digital’ quarterly reporting.
Paul Johnson, director of the Institute for Fiscal Studies, was sceptical about whether it would actually be possible to raise such ‘very, very large increases in taxes’ from companies ‘which would likely reduce the amount of investment that they do’. Johnson commented that the proposed increases would take the tax burden to its highest level in 70 years.
The IFS has also pointed out that Labour’s confirmation that it has no plans to reform pensions tax relief will open the way for individuals to avoid the income tax rises by increasing their pension contributions.
Jason Collins, tax partner at Pinsent Masons, pointed out that while the manifesto rules out any increases in ‘personal’ NICs, this ‘leaves the door open’ to a possible rise in employer’s NICs.
Dr Adam Marshall, director general of the British Chambers of Commerce, while welcoming specific measures that could benefit SMEs, thought that business leaders would see these as ‘largely eclipsed’ by higher personal and business taxes.
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