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After the election, the Conservatives and the Liberal Democrats got together and agreed on a programme of what they would actually do together in government. On taxes, they agreed their priorities were to make taxes simpler, fairer, greener and more competitive.
So how did yesterday’s Budget move them towards those objectives?
Can we just kick this one into touch now please? According to the back of my envelope, the budget is giving away £920 million next year on measures tagged with “investment and growth” (table 2.1) when, by the World Bank and Bloomberg‘s methodology we’re in the top ten places to do business and well placed in KPMG’s tax competitiveness survey. So let’s say, yes, we’ve done this one, and stop throwing money at it? Please?
Is the Budget going to make taxes any simpler? Well, pensions and savings maybe – insofar as big chunks of them won’t be taxed. But in general? OOTLAR (the inelegantly named 'Overview of Tax, Legislation and Rates' document) has only seven instances of use of the words “simple” or “simpler”:
* In a reference to the revalorisation of the VAT registration limit, commenting that this and the “simpler” income tax cash basis will help SMEs.
* In talking about the processes banks and building societies already have in place for savings, in claiming the abolition of the starting rate for savers won’t have much of an impact on banks’ processes.
* In the general measure to let governments give tax exemptions for future sporting events without having to go through the rigmarole of passing specific legislation like they did for the Olympics and the Champions League Finals.
* In a claim that “Chargeable gains roll-over relief: reinvestment in intangible fixed asset” (sic: what, only one?) “makes the tax system fairer and simpler by clarifying the current legislation.” Uhuh.
* Twice in “Modernising the taxation of corporate debt and derivative contracts” where it is claimed that the change to de-grouping rules “supports the Government’s objective of establishing a simpler, more certain and more robust tax system”. Well, I feel much better for that. You?
* In the change to the ISA rules, so you don’t have to decide whether it’s better to have a few quid in a cash ISA or a few more in a stocks and shares one.
I mean, I’ll give you the last one, and I appreciate there’s some stuff coming out of the OTS so I think on the whole I’ll mark this one as “some progress; more to be done”.
Stop laughing at the back!
The “green” elements of the tax system are mostly around fuel duty, and it’s coming up to an election year, so you couldn’t expect the government to carry on with any of “that green crap”, now, could you? Section 2.27 et seq in the actual Budget document, under the heading for spending on “Energy and Environment” is just embarrassing: £140 million extra on flood defences, granted, and £200 million on potholes but 2.31, 2.32 and 2.33 are laughable. The government “welcomes announcements”, “has agreed” someone else will “set out plans for how they will help”, and “welcomes announcements by the vast majority of suppliers…”
No. Green measures are definitely marked “see me” in red ink.
The thing is, if you’ve got a bit of money, then it actually does seem like a fair budget. You can earn a bit more and save a bit more without faffing about with tax, you can do more with your pension than buying a bog-standard annuity, and you’re not going to have to pay more for petrol and beer.
But what if you haven’t got a bit of money to start with? What if you haven’t just not got £15,000 a year to save in an ISA but you haven’t even got £15,000 a year at all? What if you haven’t got a job, or haven’t got enough hours, or you’re on a zero hours contract or you have a disability or are a carer?
Well you’ll be under the cap. Because while there’s no limit on the amount of money you can accumulate in profits or rents or inherited wealth, and no-one is going to tax you on the money you make just from having stuff that accumulates in value, not even when you die and pass it on in their silver spoons to your children.
But if you haven’t…
… if you haven’t, well, there’s going to be a fixed amount of money. Fixed like a granite slab over the heads of the ordinary, poor or unlucky; regardless of how many of us there are, or what changes in circumstances might have pushed us under. And once you’re under, well, the cap fixes the amount we can share out. Let’s fight it out amongst themselves. I warn you not to be ordinary.
Sorry George, but beer and bingo aren’t going to distract us from noticing. Fairness – must try harder.
Full hypertext links to sources for this article are available here: http://tiintax.com/2014/03/20/more-competitive-simpler-greener-and-fairer/
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© Wendy Bradley is a PhD student at Sheffield University, working on the relationship between tax simplification and better regulation. She is a member of the Women's Budget Group and also blogs at http://tiintax.com, from which this article is adapted. Twitter: @wendybradley Ekklesia blog: http://www.ekklesia.co.uk/wendybradleyTweet