It's always good to reflect on things overnight. I have thought on the budget. My feelings are:
1) Terribly weak on the environment and all things to do with environmental taxes;
2) I think it's a real indictment of a Labour government that the likely losers from this budget are relatively low paid people without children. The wealthy lose nothing. Inequality grows as a result;
3) I remain of the view that this is a good budget for business. It gives lower headline rates for big business, who pay most corporation tax, and brings tax reliefs closer into line with economic reality. This should be welcomed by the tax simplification lobby, but you won't hear it;
4) I also remain of the view that this is good for small business. Those who are complaining about a rise of 3% in the small companies rate of corporation tax need to note two things. The first is that this is rarely paid except as part of what is legitimate tax planning. Second, the new rules on capital spending are a real boon ion both tax and admin terms . Again, this should be welcome. It's what business says it wants, until it gets it. I sniff hypocrisy in the reactions I'm getting. Small business should also be thinking about better ways of structuring instead. Why is the Limited Liability Partnership so underused, for example?
5) This was a timid budget. No real moves on tax avoidance. Plenty of detail, but nothing on domicile, residence, offshore in general, or beating the Channel Islands VAT game. So no signals of real intent. That's a massive disappointment.
6) I was amused to see the Tory reaction so off-beam at first. Cameron has a lot to learn on the economy.
And where is Labour strategy going? Hard to tell on the basis of this. Plenty of politics, not a lot of real change is not a strategy. It's pragmatism. They're not the same thing.
Is Brown waiting for a bold move when he's PM? I hope so. But I'm not holding my breath.
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Hi Richard,
I take your fair point about small businesses – but as I mentioned in my last comment, small companies selling the owner’s services, such as my company, are likely to be worse off because capital allowances aren’t relevant if you don’t need to buy assets.
I also take your fair point about tax simplification, but I am concerned that those who will be hit hardest are those with an income level just above the personal allowance. Where before they were taxed at 10%, in the future they’ll be taxed at 20%. Double the tax. Ow!
I know Gordon says that tax credits will help there, but if the winners of University Challenge can’t calculate tax credits correctly, what hope have laymen?
I remain sceptical about the budget.
M
I also think that a lot of your commet is fair but I would not agree about the small companies rate mainly being paid by those undertaking tax planning. I think the small companies rate is a welcome tax break for many smaller businesses.
After all, we have 2 tax bands for individuals (20% and 40% – lets ignore 10%, 22% etc!!) and I think it is reasonable to have some level of differentiation for businesses.
Before I am shot down, I am not someone who makes use of such companies nor do I advise individuals on the use of these companies but I think that we need greater thought on the levels of corporate taxation in this country.
That said, I agree with the other comments but I just wish that he budget did not descend into panto. I wish that Brown would just have said that the tax cuts were being funded by corrections elsewhere in the system. However, as it was the present Government who introduced much of the anomalies then this would be a step too far.
Keep up the good work.