Chancellor Philip Hammond delivered a pro-business speech aimed at reassuring businesses that the economy is “match fit”, should turbulence hit our shores when leaving the EU
Tax simplification would have been a great way to support businesses, but the chancellor missed a trick, says David Brookes, tax partner at BDO
CHANCELLOR Philip Hammond delivered a pro-business speech aimed at reassuring businesses that the economy is “match fit”, should turbulence hit our shores when leaving the EU.
The chancellor touched on the complexity of UK tax code – but businesses will be disappointed that more wasn’t done to progress tax simplification.
UK tax legislation is almost 20,000 pages long. From a business perspective, the sheer volume and complexity of tax law is a major obstacle to growth. He acknowledged this briefly when he announced his first real tax simplification action – having just one major fiscal event each year from 2018, the Autumn Budget.
Businesses should welcome this move. The impact won’t be immediate but it is a step in the right direction; it will make it easier to plan for the long-term, could improve the quality of legislation and result in less frequent change for businesses.
He also touched on the alignment of employees’ and employers’ national insurance thresholds. This is not the alignment of income tax and national insurance that businesses were calling for; the current proposals will not help reduce the administrative burden, nor does it bring employment taxes into the 21st century.
The government says it welcomes and has responded to the reviews the Office of Tax Simplification published this autumn, including the alignment of income tax and NICs. It has now asked the OTS to carry out reviews on aspects of the VAT system and on Stamp Duty on share transactions, so we could see more on these in the coming year.
Hammond spent a lot of time talking about infrastructure and productivity. It is rumoured that every £1 invested in infrastructure results in £3 of economic activity so I can see why it was the order of the day.
However, the productivity puzzle is a tough nut to crack, and the government must realise that it’s not just about innovation; it’s about producing more by doing less.
Making things simpler, helping businesses navigate the system and eradicating out-dated laws that make tax more taxing can only help growth and prosperity in the long term.
David Brookes is a tax partner at BDO