Budget analysis - Budget is good training for longest-ever Finance
The chancellor’s coverage of issues in his speech was highly selective. Multinationals found this to their cost after listening to a Budget speech which gave no clue to the changes waiting for them. The debate about the chancellor’s proposed changes to double tax relief is set to run and run as the Treasury and taxpayers continue to dispute the estimated yield to the Exchequer of the proposals. Multinationals should therefore lobby hard to persuade the Treasury its estimates are incorrect, and that the proposals are damaging to the UK as a holding company location. In the meantime, they should plan to take advantage of the old rules between now and 1 July 2000. The increase in stamp duty was anticipated but was expected to be confined to the top end of the housing market. Curiously, the rise is mentioned in the Red Book under measures to promote a fair and efficient tax system, in the context of a restatement of the government’s commitment to address unfairness in the tax system. As the brunt of the increase will be borne by business, it is difficult to understand how this will promote a fair and efficient tax system unless the definition of fair and efficient is ‘more revenue’. Stamp duty is a substantial source of revenue for the government and is expected to raise #6.6bn in 1999/2000. There are a number of measures to promote simplification in the tax system. Groups of companies have been provided with a practical solution to their need to set capital gains off against capital losses on a group basis. Proposals have also been made to modernise the capital allowances system, modernise the group relief rules and modernise the complex rules relating to exchange gains and losses, derivatives and loan relationships. These measures are welcome but they are only a small step in the direction of a more intelligible tax system. Any overview of the significant number of proposals in this year’s Budget must be selective. In any event, there is a substantial amount in the Budget for taxpayers and their advisers to get to grips with, and perhaps this is the training they require to prepare for what is expected to be the longest Finance Bill in history. David Cruickshank is UK head of tax at Deloitte & Touche.