Firms rush to advise Brown on tax reform
The dust from Labour's landslide election victory had hardly settledbefore tax experts were bidding to influence new Chancellor GordonBrown.
With a first Budget due by 1 July at the latest, the profession was keen to lay out its ideas for the new Government. Most anticipate a hit on the ‘hidden’ taxes, including MIRAS, advance corporation tax, national insurance and inheritance tax.
Coopers & Lybrand’s head of tax, Peter Wyman, said changes to MIRAS or personal allowances could be backdated to 6 April. ‘But the biggest risk is if he piles in with ill-thought out tax reforms. There’s nothing in the manifesto that has been properly debated apart from the windfall tax.’
Price Waterhouse’s head of direct tax, John Whiting, added: ‘The tax system is not a delicate little flower, but the implications of any changes must be thought through.’
Ian Barlow, KPMG’s head of corporate tax, warned Brown that phasing out tax credits would have grave repercussions for pension funds and other financial institutions. ‘He won’t have had the resources in opposition that he has now. He must look at the knock-on effects.’
Barlow said he expected Brown to target the company sector ‘because it is not as visible to the taxpayer’. He also expected VAT to be reviewed.
‘We have more zero rates than any other EU country. He probably won’t touch areas like food and children’s clothes, but there are plenty of others to choose from, such as housing and financial services.’
But Barlow still argued that Brown should get the pain of any tax rises or the abolition of tax credits over in the first half of a Parliament.
‘He can afford to take his time, introducing measures during his first two budgets rather than squeezing everything into one.’
Ernst & Young corporate tax partner Richard Law said Brown should avoid dressing up anti-avoidance measures as reform. ‘Potentially positive moves such as reducing capital gains tax could be swamped by bureaucracy or so hedged in by anti-abuse provisions that they become a burden instead of a benefit.’
ACCA urged greater tax simplification and a central co-ordinating agency to reschedule debt for tax, VAT and national insurance. The association also called for an attack on the capital gains structure with a war on short-term gains and tapered relief for longer-term gains.
ACCA president Peter Langard said: ‘We want measures to provide a stimulus to both small businesses and the economy in general.’
