Partner Article

What is a poor Chancellor to do?

Addressing the Treasury Select Committee yesterday, Chancellor of the Exchequer George Osborne said: “The vast majority of people pay their taxes on time and the people who don’t pay their taxes are a burden on everyone else, and the taxes have to be higher on everyone else as a result”.

At one level, and with tax revenues not matching expectations, this is a statement of the obvious. At another, it’s a reminder of how precarious the flow of UK tax revenues has become.

We’ve already noted that, with business taxes coming down, the balance of taxation has to shift towards individuals. As more individuals are taken out of the tax net through rising personal allowances, fewer people have to pay more income tax. So it’s left to VAT to close the gap.

With news of budget-busting multi-billion pound payouts on VAT claims (see below), the Chancellor’s scope to offer pre-election tax sweeteners in the March 2015 pre-election Budget is already looking limited.

Reforms to the tax regime for defined-contribution pension schemes are already set to raise an extra £3bn for the Exchequer over the next four years. But the Budget Day “Red Book” shows this has already been sent. So will we see new tax-raising measures introduced during the year? Or a purge on tax avoidance and evasion? A renewed focus on the VAT gap perhaps?

Despite new resources for HMRC, and new legislation on its way through Parliament, it’s difficult to see how those can deliver the goods in time. What is a poor Chancellor to do?

This was posted in Bdaily's Members' News section by George Bull .