The Institute of Chartered Accountants in England & Wales has warned that although Gordon Brown is unlikely to raise taxes in this year’s election budget, future tax increases seem inevitable.
The ICAEW tax faculty believes that Treasury revenues are not keeping pace with public spending, but that because of the looming election Brown will not dare increases taxes to fill the revenue gap. After the election, however, whoever is in power will have to face the cold reality of having to hike taxes.
‘It looks inevitable that the next chancellor will have the unenviable task of raising taxes. He or she is likely to look at raising VAT from 17.5% to 20%, which would net about £10 billion,’ said Frank Haskew, Head of the Institute’s Tax Faculty.
The ICAEW added that the chancellor in charge come the next budget would also be tempted to raise corporation tax, but would have to balance this against the likelihood that future growth would come from the corporate sector. This would leave income tax and national insurance as the leading targets for boosting revenues.
‘It seems the top rate of income tax has become sacrosanct, but simply freezing personal allowances could raise serious money,’ Haskew said. However, he warned that the future chancellor would ‘probably be forced to go one step further’ and consider raising rates through national insurance contributions.
Haskew said: ‘Tax may not be the major battleground in the next Budget and the forthcoming election but it looks set to become so afterwards.’
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