Government needs to put stability ahead of headlines
ACCA offers advice to the Chancellor ahead of December’s Autumn Statement.
The Chancellor should concentrate on putting stability ahead of headline grabbing tax breaks when delivering his final Autumn Statement of this parliament, advises ACCA.
Chas Roy-Chowdhury, ACCA head of taxation at ACCA, offers comment on the following issues:
Export incentives for SMEs 'Tax breaks for certain industries have brought benefits for those able to take advantage of them, such as the tax break for creative industries and R&D for SMEs in recent budgets. They may well have played a part in bringing the economy back to growth, but what we need now is stability. Within the confines of EU competition law we ought to consider offering a form of R&D style credit for SMEs which export.'
Tax stability 'We should ensure we do not get tax shocks, but that changes are thought through and properly exposed. We have an extremely complicated tax system and further tinkering to aid one industry or another will just add to this further. The best thing for the economy would be a period of stability to help businesses plan for the future. It would also allow HMRC and the Office of Tax Simplification to do much needed work on making the system easier for everyone.
'Without certainty, neither governments nor taxpayers can effectively budget or plan for their future actions. ACCA believes that certainty is a key requirement for proper operation of a “good” tax system but that this is an area in which systems in many jurisdictions fall short. Many tax systems call upon taxpayers to self-assess their liability to tax, yet the legislation may make it impossible for taxpayers to establish their liability accurately under the law. For businesses, certainty is key to confident decision making. Plans based on incomplete assumptions introduce risk. Uncertainty about prospective tax receipts is equally concerning for government.'
Stamp duty 'Although a period of stability is needed there are changes the government can make without complicating matters. The easiest would be for the government to finally give in to calls to reform stamp duty. Scotland recently announced an end to the slab nature of this tax when they assume control in 2016 so now would be the perfect opportunity for the Chancellor to consider reform but in a way which recognises property inflation and the different property price profile in the rest of the UK.'
Income tax and national insurance 'As we have said above we need to ensure that the complexity of taxation and specifically Income Tax is addressed. We should firstly ensure that both Income Tax and National Insurance stay aligned rather than the huge divergence which has currently opened up. As an example, say in a future year Income Tax started at £12,500, that should also be the starting point for National Insurance. We should also look to stop taxing at a rate of effectively 60% for those earning over £100,000 who lose the personal allowance. The withdrawal of the personal allowance was meant to be a temporary measure. If it is not restored then a much longer tapered withdrawal should be implemented.'