Recently in Tax Category
A report entitled 'The UK Pensions Crisis' published by the Taxpayers' Alliance and Terry Arthur, a fellow of the Institute of Actuaries has finally confirmed with facts and figures what many people already strongly believed namely that UK private sector pensions are in a mess. The $64,000 question is who is going to pull pensions out of the well; on past performance it is certainly not going to be the Government.
Gordon Brown has decimated every private sector pension and sounded the death knell of final salary schemes.
It is, of course, wonderful that Lewis Hamilton has become the youngest Formula 1 World Champion Racing Driver and is all set, apparently, to become a multi-millionaire. Less wonderful is the fact that he will be living as a tax exile in Switzerland. But can you blame him if it means that he will keep a lot more of what he earns.
Wealthy potential immigrants to Switzerland can do a deal with the Swiss authorities that limits the amount of Swiss tax they pay. Our government on the other hand has, been busy attacking wealthy foreign nationals who are resident here by withdrawing the remittance basis of taxation once they have been here for seven years unless they pay a fixed annual tax levy of £30,000.
The Swiss have obviously realised that even if wealthy expats are not paying much Swiss tax they are spending money in that country.
If any further proof was needed that no Government in future will be able to squeeze the very wealthy until the "Pips Squeak" this is it. High earners won't stay here and pay what they regard as unacceptably high levels of taxation.
The time has come for politicians of all parties to realise that there is not a bottomless pit of money that they can dip into whenever they want to and leave us all to pick up the bill in the form of increased taxes. People will, like Lewis Hamilton, vote with their feet.
There is an old adage, which rings true in many situations, that 'he who pays the piper calls the tune'. Unfortunately in some situations the old adage does not come true and those who pay the piper definitely do not call the tune.
It gave me no pleasure to read in Jonathan Walker's front page article in Tuesday's Birmingham Post, confirmation of my fears that the Prime Minister will indeed be looking to fund his proposed spending spree from future tax revenue's. (See my previous blog)
The fundamental point made in Jonathan Walker's article is that the proposed 10 Eco Towns will be going ahead in spite of the big slow down.
The cost of building one of these new towns (Middle Quinton) alone will cost around £500m. Ministers have not revealed how much of the cost will be met by the public purse but it is expected to run into hundreds of millions of pounds across all ten towns.
The total bill for bailing out the banks and buying our way out of recession just seems to be going up and up. The problem is that eventually the piper will have to be paid.
Gordon Brown has confirmed that the cost will be met by Government borrowing with the money being repaid once the economy picks up and tax revenues rise.
The problem is that pre-recessionary tax revenues were barely sufficient to balance the books. Even if, therefore, they do revert back to those levels it will not give Gordon Brown any spare funds with which to repay the significant borrowings now being talked about.
What therefore is the bottom line on all this?
Significantly increased tax bills!
Much has been said in the recent press about the need for the UK to bring its tax system in line with EU Law.
The UK is under pressure to ensure that dividends from companies in other EU states attract the same advantageous tax treatment as dividends between UK companies. At the same time, much is also being made of the number of UK companies who are departing these shores for Ireland, to benefit from Ireland's 12.5% Corporation Tax rate.
This is interesting given that it is anticipated that the EU Commission will bring forward a proposal for a common corporate tax rate in the second half of 2008 during the French EU Presidency.
France of course supports the concept of a "common corporation tax" but they are aware that a number of member states have reservations about the proposals.
Is this surprising, given the substantial benefit that Ireland is currently enjoying?
As Gavin Cordon's article in today's Birmingham Post made clear; Gordon Brown is still intent on the country spending its way out of the looming recession, despite a massive rise in public sector debt.
This is clearly money that is going to have to be found in addition to the funds to bail out the Banks and Building Societies. The cost of all this is clocking up at an appalling rate. Initially, 'Darling' may be able to borrow even more to meet a significant part of the cost; but as every householder knows, borrowing eventually has to be repaid.
The $64,000 question is... How?
Falling foul of the current intestacy law is somewhat akin to falling off the edge of a cliff for the majority of surviving spouses/civil partners. Following recent changes announced by the Ministry of Justice, the fall might not be so damaging, but you could still end up battered and bruised.
Most people think that if they die without leaving a Will everything they own will go to their surviving spouse/civil partner. Wrong!
As promised in my blog yesterday, I outline my "Simpler tax ideas".
Everyone acknowledges that we all have to pay taxes to fund the running costs of the country. The highly complicated nature of those taxes puts unnecessary pressure on business and there is increasing evidence that businesses are leaving the UK to find friendlier regimes. Furthermore, respective entrepreneurs are being put off setting up in business at all by the tax regime and bureaucratic red tape in the UK.
The Government has to do something about this now, if the competitiveness of the UK is to be maintained as a place to do business, in what is now a "global market place".
My suggestions below make for a much simpler approach, leaving businesses to concentrate on what they do best - building a great industrious and prosperous country (fighting off the tumultuous financial battles that lie ahead for all - just to survive).
As regular readers of this blog will know, I firmly believe that our tax system is too complex and a serious disincentive to business growth in this country. I was delighted, therefore, to be invited to take part in a British Chambers of Commerce Breakfast Forum at the Conservative Conference in Birmingham. The topic of the forum was "Simpler tax for Maximum Business Growth" and it was attended by Philip Hammond MP (Shadow Chief Secretary to the Treasury) and John Redwood MP.
The Chambers of Commerce hit the nail directly on the head in choosing to air this topic which is vitally important to their members.
It has today been announced that BBC newsreader Moira Stuart will take over from BBC presenter Adam Hart-Davies as the new face of HMRC's tax advertisements.
She will follow in Adam Hart-Davies' footsteps in urging taxpayers to file their returns on time but she will also be urging them to file online.
I am all in favour of using technology to reduce work and speed things up but with recent stories about lack of computer security by HMRC ringing in their ears, some taxpayers may be sceptical about adopting online filing.
Currently taxpayers still have a choice. It is almost inevitable that eventually they will not. If so, it is vital that HMRC work on increasing customers' (their new name for taxpayers) confidence in the system.
Would you file your return online?
The other interesting point surrounding the announcement is that in a Radio Five Live interview earlier this year Adam Hart-Davies, whose slogan was, "Tax doesn't need to be taxing," stated that he believed that the system was, "too complex especially for the self-employed," and that "VAT is absurdly complicated."
Is this the reason for the change of face we might ask?
Events this week, and in particular comments from the Liberal Democrats at their Conference in Bournemouth, have only served to further confirm that tax is now the clear political battleground between the parties.
Cynics might say that at least this has given the NHS a period of 'respite care'. Better for the physical health of the country you may suggest; but what about its economic health?
Two suggestions so far by the Liberal Democrats have been a high speed rail link to Birmingham funded by a motorway tax and cuts in the rate of income tax funded by higher taxes for the 'better off' a clampdown on tax avoidance and 'Whitehall' cuts.
If the current credit crunch has taught ordinary householders in the UK anything, it has been that the Country cannot survive long term on ever increasing levels of debt. It has to cut its coat to the available cloth.
Politicians, however, seem to have this concept of deciding what they want to do, and then trying to find the way in which goose can be plucked to pay for those plans with the least hissing and commotion.
Would it be too outrageous to suggest that politicians should also start to think this way and move away from trying to pluck the goose by ever increasing stealth taxes? In other words, they decide on what is a reasonable and acceptable level of taxation on the population and then see how to get the very best value from that money.
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