Budget predictions and demands can be boring (read most of those in the Observer if you don't believe me) but it is an annual requirement to make clear what you want knowing full well that you'll be disappointed. If that's to be the case I've decided to go for maximum remorse and show no restraint in what I'd hope for.
Transparency
1) Full country-by-country reporting, of course, for all the reasons given here;
2) Full automatic information exchange required with all our own tax havens now, and that they be required to offer the same to all countries without a record of serious human rights abuses;
3) All our tax havens be required to file limited liability entity accounts on public record;
4) Reform of UK small business accounting so all had to file a full set of accounts as submitted to shareholders: the farce of omitting the profit and loss account should end;
5) The beneficial ownership of all shares should be required on public record;
6) Banks should be required to submit an annual report to Companies House and HMRC of all companies that have an open bank account to ensure that these companies cannot be struck off without filing accounts. Failure to file accounts automatically leads to right to access bank records for HMRC and personal liability for tax due (of any sort) by directors;
7) A UK register of trusts should be created;
8) The beneficial ownership of all companies be recorded on public record.
All these measures are intended to track the corporate tax base, make clear who is accountable for it and extend liability of those with obligation to pay it, all with the intention of defeating tax evasion and avoidance by use of corporate and trust structures.
Avoidance
1) Welcome the general anti-abuse rule and develop it;
2) Add a penalty regime for abuse of the GAAR;
3) Replace the double reasonableness test with an economic substance test;
4) Abolish the role of the advisory panel drawn from the tax profession who would have no role if the reasonableness test were removed;
5) Specifically extend the GAAR to the abuse of double tax agreements.
See also the section on transparency.
1) Increase the UK large company corporation tax rate to 30% with immediate effect;
2) Offer a two year 100% tax relief on corporate investment in plant and machinery and more limited allowances in the case of buildings, providing incentive to spend to reduce the overall rate of corporation tax due which cuts in tax rates are largely eliminating;
3) Introduce a minimum rate of corporation tax due (having taken the above investment allowances into account) on all UK resident companies;
4) Bring UK residence and permanent residence specifically within the scope of the UK GAAR;
5) Specifically make the OECD profit split arrangement for attributing income to states within multinational corporations the UK's preferred method for determining such issues in preference to the discredited arm's length pricing method;
6) Commit to planning for the introduction of unitary formula apportionment taxation;
7) Remove tax relief on all salary and benefit packages for any person within a group enjoying total salary and benefits (excluding pension contributions) exceeding £250,000 a year;
8) Announce review on replacement of the small limited company by a new corporate entity that taxes all UK resident owners at their marginal income tax rate on all profits earned if not reinvested in the business to remove the use of limited companies as tax avoidance arrangements;
9) Remove the patent box arrangement;
10) Introduce a UK corporation tax charge on all dividends received with credit for underlying tax paid to put an end to territorial taxation;
11) End the new exemption of offshore in-group financing companies;
12) Announce immediate review of CFC rules and seek OECD and EU cooperation.
Income tax
1) Cancel abolition of the 50p tax rate;
2) Increase personal allowance in line with inflation, preferring a VAT cut instead;
3) Scrap new system of limiting tax reliefs and in their place put in place an absolute limit on the cash value of reliefs available to anyone (including personal allowances, pensions and investment related reliefs) for anyone earning over £100,000 per annum with the cash value of allowances reducing as income rises;
4) Cap the rate of tax relief on gifts to charities under the control of the donor;
5) Announce review on the integration of income tax and national insurance to be associated with introduction of a new, universal, family benefit to all available for work and all pensioners.
National insurance
1) Cut employer contribution rate to 10% for a year;
2) Introduce an investment income surcharge on all unearned income over £5,000 a year excluding pensions (with a £25,000 limit for pensioners) to help pay for cut in employer NI contributions; to create a level playing field for those with earned and unearned income and to discourage the payment of dividends in lieu of salaries by small companies.
3) See reference under income tax to review of future arrangements.
VAT
1) Immediate cut in main rate to 17.5% to boost economy.
Capital gains
1) Align rates with income tax;
2) Reduce entrepreneur's relief over three years to £1 million;
3) Reduce annual allowance over 3 years to £5,000;
4) Deem all disposals by one spouse of an asset gifted from the other within three years of the date of the gift the gain of the original owner.
Inheritance and wealth taxation
1) Announce a radical review of the tax to be replaced with a gifts receipt tax;
2) Announce review of wealth taxation to include:
a) Land value taxation
b) Reform of Council Tax
c) Wealth taxation.
1) The time for the UK to cooperate with other nation states in Europe on the introduction of a Robin Hood Tax has arrived. This is the budget when it should be announced.
Banking
1) Announce that all banks will be required to wholly separate their investment banking operations from their Mainstream operations: the option of ring-fencing is to be removed and separation is to be mandatory;
2) Nationalise Royal Bank of Scotland and announce intention to be an active investor in Lloyds TSB.
3) Provide a combination of a national investment bank and regional banks (created from Royal Bank of Scotland if need be) with a minimum of £20 billion of capital from quantitative easing for direct investment in capital infrastructure and smaller business investment creating jobs in the UK;
4) Plan for nationalisation of the bank clearing system and inter-bank trading systems with banks being granted licences to use such infrastructure in exchange for a fee in future. Nationalisation to be paid for in gilts with restricted trading rights until certain economic performance criteria (less than 1 million unemployed, for example, are met).
Pension reform
1) All pension funds to be required to invest not less than 1/4 of all new funds invested each year for the next five years in projects resulting in the creation of new employment in the UK in exchange for continued tax relief on contributions made. Some designated gilts and capital of new national investment bank to be included in this arrangement.
2) By default new pension scheme contributions to be invested in low risk infrastructure based projects unless the pension contributor opts for anther arrangement.
Green New Deal
1) Announce a national programme of the sort now being promoted to insulate homes and business premises in Birmingham and provide specific support needed to local authorities to create such programmes by removing current legal roadblocks;
2) Specifically permit and encourage local authorities to raise borrowed funds (including from pension funds) to invest in new social housing.
Investing in regulation
No reform package can be delivered if the resources to ensure it is effective are not available. This programme is backed by a commitment to:
1) Provide Companies House with a significant staff increase to ensure that the UK corporate sector is properly regulated from top to bottom and those transgressing are brought to account;
2) To provide HMRC with the resources needed to collect the taxes due in the UK and to comprehensively tackle the tax gap.
Both commitments are expected to deliver revenue yields many times in excess of their cost whilst creating new employment opportunities throughout the UK.
HMRC reform
HM Revenue & Customs has developed a corporate culture inappropriate for a national tax authority. It is, in particular, dominated by the opinions of accountants, lawyers and business personnel representing the banking and large business communities. This is not in the national interest as a whole and a thorough review of the future structure of the management of HMRC will take place as a matter of urgency to ensure that it is fit for purpose.
Summary
This is a radical programme. It includes current tax cuts, most especially by reducing VAT, but it also includes strong measures to reinforce investment in the most pressing areas of need. These are the creation of new jobs in the UK economy, in energy conservation and in new housing. To achieve this goal many of the reforms, for example in banking, pension reform and local authority borrowing are related as part of an integrated and innovative package.
The problems of tax avoidance are tackled in a number of ways; by improving the general anti-abuse rule, by extending its scope, by reducing the opportunity to abuse income tax and capital gains tax rules, by beginning a package of small company reforms and as importantly by radically transforming corporate and trust transparency within the UK and its tax havens.
None of this can be achieved without increased borrowing in the short term and sources of this are indicated. The economic activity the package of measures that is proposed will create will generate a capacity to repay that borrowing in excess of the original sum borrowed. It is stressed, this is a debt reducing budget in a way that no austerity programme can be.
Finally administrative reforms to ensure that the culture of our civil service and the agencies responsible for collecting tax and regulating business are essential and all such issues are addressed.
This is not the budget George Osborne will announce. It is the budget the country needs.
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I’d vote for that, if I was given the choice.
Great piece, replaces mealy mouthed words of politicians with real action on tax avoidance, makes tax system fairer and directed towards recovery.
A clear and coherent list of proposals that would bring transparency and an increase in justice, redistribution and acountability across Government, Tax and Business.
We all benefit from knowledge and require data to make evidence based decisions. The
proposals listed above can act as a catalyst for positive change in the way we conduct our Tax Business.
Will Ed Balls wise up? Lets keep the pressure on by sending this list to as many
Politicos as possible. Campaign for a just Tax system.
Can we add to this a requirement that auditors may not have limited liability protection so that if they are found to be negligent they could lose everything. Could we also have a further reform of the pensions industry obliging them to be fully transparent about where money is invested and possibly a comparative scoring system that allows savers to see which funds are investing effectively to enable the future working population to support pensioners (through improved resource management, improved housing and other infrastructure, social innovation and investment in production of goods and services that are of real value to well being).
I like both
If you are calling for a land value tax, why are you suggesting reform of the Council Tax – it would surely replace it?
one is a step on the way to another
Aftenoon Mr. M.,
You mention Council Tax reform – what do you have in mind? The people to pay more automatically or for Councils to get a much reduced grant from central taxation and then raise their own cash for their own spending? Localism in action so to speak.
It’s just that before in a previous post you responded with “Why would I cut?” Obviously as HMGs spending comes from taxpayers plus borrowing – at the moment for every £6 pounds of HMGs spending, it has to borrow a £1 and maintain spending to pay the interest of the debt – so surely some trimming of state spending is required. After all former CSttT, Liam Byrne said, “Sorry, there’s no money left.”
I’m just a little confused in terms of what you mean by ‘reform’.
I notice under pension reform you seem to be willing to order pension funds where to invest regardless of return. Is that a fair summary?
I take it you do realise that most if not all major occupational funds are in deficit and you seem to want to force them to invest in low return investments. I say low return as I’m guessing that if the returns on infrastructure were any good, the pensions funds would be ‘piling in’ (or putting pressure on to be allowed to invest) and they are not.
In fact one of the largest, the BSPS, see no value in that sector and have made it clear that they have no plans to invest in such ‘infrastructure arrangements’.
http://www.bspensions.com/media/userfiles/files/newsbrief-2012-web.pdf (page 14)
Are you going to tell 151,000 members of the BSPS scheme that their incomes or projected incomes are likely to be reduced because you want investment in low returns sectors to suit your desire as CotE for investments in low return areas?
Are you then willing to put back in place the tax arrangements that Gordon Brown took a sledgehammer too to promote the growth of the pensions funds?
I’d also say your £250,000 cap on tax relief is way to high. It’s about 10 times average earnings. I’d prefer to see that cap reduced to £200,000. Can I also ask why you’d bring back the 50p rate….given that for all about of month of Labour’s time in office they utterly resisted such an idea? Surely if it raised funds, TB and GB would have done it much sooner.
I’d argue GB only brought it in with a month of his term left to annoy the Blue Mob rather than for any serious economic reason.
I mean adding extra bands for now as a step towards more effective land taxation
I was not being much more adventurous than that
Broadly agree with a couple of notes:
i)Is your proposed wealth tax a French style tax on whole net worth?
ii)Why not simply ‘see through’ all trusts, UK and overseas, and Stibtungs, like they do in USA and France, and tax on beneficial ownership of the whole lot?
iii)Why not outlaw transfer pricing by imputing residence if a company trades here without suffering CT in a normally taxing country?
Broadly the transparency stuff and company stuff is very good. I do wish HMRC would break free from the corporate vampires that are killing it. Probably needs legislation, and a board of trustees that are no goverments corporate pals.
Having worked in tax planning for years I could go on and on, but it does rankle that we can do imaginative wealth management, such that a billionaire client can pay less tax proportionately than his or her cleaner, nanny, or P.A,. taking notes in these meetings.
Dont even talk to me about Non-Doms!
Splendid!
I’ve got a query — in Corporation tax: 8 you mention a new corporate structure for small companies. I’m interested in your view of my own affairs. My small company has extremely “lumpy” income from year to year. Do you think it’s unreasonable to use a company to smooth this effect off so that my earnings from the company, and taxation, are relatively constant year on year?
Also, in Corporation tax: 2 you propose a 100% relief on corporate investment. Excuse my ignorance, but isn’t there already 100% relief on investment? My understanding is that companies pay tax on profits, and purchases and investment are offset against income, meaning you never pay tax for them?
I’m interested that you only suggest a VAT reduction to 17.5, rather than 15, 10, or even to 0. Maybe that would be too radical or are there other reasons why it’s not a good idea?
Thanks!
I am not wholly convinced by income smoothing – no. It s not available to the vast majority of self employed people for a reason
Re 100% allowances – not available to big business
Richard, you’ve just written Ed Balls’s June 2015 Budget (or at least you have if Ed has any sense…) Great stuff.
The argument against tax cuts for high rate tax payers is that they (especially in a recession) tend to save the additional after tax income and not spend it into the economy. That is the argument for a VAT cut. But looking at it practically, a low income household is likely to be spending the majority of its income on zero-VAT items such as rent, transport, council tax, food, water/sewage, childrens clothing etc or reduced rate such as heating. So a VAT rate cut would have little impact on their disposable income. By contrast, higher rate taxpayers spending is far more likely to on vatable items, would have a bigger impact on disposable income esp for middle class households. Which then brings us back to the first issue, that they are then likely to just save that extra.
So I am not convinced a VAT cut is the best answer, there must be another way to get extra money into the hands of low income households (so that they are better off) who then spend it into the economy, without it getting into higher earners hands who merely save it. I am not sure what the answer is, some kind of one off transfer?
That’s why I only suggesting reversing Osborne’s move – and that’s partly to counter inflation
I’d rather spend the money insulating homes, create loads of jobs (albeit only for a few years), cutting emissions and lowering heating costs and hence energy imports.
This seems the biggest no-brainer in a country full of old, inefficient housing stock where heating bills have sky-rocketed.
Quite so