TaxCorporate TaxBrown’s Budget may raise taxes

Brown's Budget may raise taxes

Next week's Budget will be chancellor Gordon Brown's seventh, and the speculation about what he might deliver has begun in earnest.

Although the lack of any earth-shattering news from Brown threatens to turn the speech into something of a damp squib, there is no doubt that a great deal by way of information will see the light of day.

John Whiting, tax partner at Big Four firm PricewaterhouseCoopers, claims the speech will be a short, sharp affair, with an abundance of bad news.

This could well be the case, and the most obvious example of this will be an embarrassing back down from his economic growth forecasts given in November. ‘For the second time in six months, he will have to admit that his previous forecasts for the economy were too optimistic,’ says Roger Bootle, economic advisor to Deloitte & Touche.

Brown can approach this in one of two ways: he could increase taxes again to fill the black hole, or he can increase public borrowing. It can be assumed he will do the latter.

But according to Bootle, this is not necessarily the case. He says that taxes will eventually have to be raised by as much as £7bn a year if Brown’s fiscal rules are to be met.

Rather than risk implementing this increase close to a general election, he may choose to do so much earlier. And with the Iraq war in full swing, he has an excuse to implement a tax increase to fund the effort – he has already given a theoretical blank cheque to the Ministry of Defence.

‘We expect only very modest tax increases of £1bn to £2bn. Possible sources of revenue include national insurance (again), stamp duty, personal allowances, and excise duty,’ says Bootle.

He could also earn some much needed cash on the so-called ‘environmental taxes’ of plastic carrier bags and an increase on levies charged for landfill.

While commentators have been quick to dismiss the possibility of the chancellor raising taxes further, this may not be the case. A combination of war and poor economic growth might force his hand.

Related Articles

Watch out when winding up

Corporate Tax Watch out when winding up

1m Emma Rawson, ATT Technical Officer
How might Brexit affect UK tax policy?

Brexit & Economy How might Brexit affect UK tax policy?

1m Santhie Goundar
Corporation tax losses – your newly flexible friends

Corporate Tax Corporation tax losses – your newly flexible friends

4m Emma Rawson, ATT Technical Officer
HMRC large business tax enquiry duration rises to 3 years

Corporate Tax HMRC large business tax enquiry duration rises to 3 years

4m Emma Smith, Managing Editor
SMEs paying higher rate of corporation tax than big businesses

Corporate Tax SMEs paying higher rate of corporation tax than big businesses

4m Alia Shoaib, Reporter
Big names, little tax: Airbnb, Facebook, Kellogg’s, eBay

Corporate Tax Big names, little tax: Airbnb, Facebook, Kellogg’s, eBay

7m Alia Shoaib, Reporter
New trading allowance: simplicity, but not as we know it

Administration New trading allowance: simplicity, but not as we know it

7m Emma Rawson, ATT Technical Officer
EU divided over radical tax reforms targeting tech giants

Corporate Tax EU divided over radical tax reforms targeting tech giants

8m Alia Shoaib, Reporter