March Budget 2016

muon · 21 Mar 2016 at 22:19

Rosbif said:
I flicked through the document this morning, they're expecting quite an uptick in capital gains tax collections despite the cuts. The corporate income tax receipts were pretty flat from what I recall.

Also buried in there is the forecast for environmental taxes and stamp duty, these are forecast to rocket.

(Forecast through to 2020)

I agree that it'll look relatively flat with the 1% cuts we are getting now, but the 28% to 20% cut was not flat. Cumulatively going from 20% to 17% isn't flat either.

The impact was relatively muted when it was announced, because due to the recession not many companies were making profits (or had deferred losses).

Page 139 is the key really. The growth in Corporation Tax Receipts is dwarfed by the increase in receipts via Income Tax, NI and VAT.

The government is rebalancing away from taxing profits to income, but reducing the average tax rate for income at the top. The projections below are with all the predicted corporation tax revenue from reducing tax avoidance.

Tunney · 21 Mar 2016 at 22:36

Crabb has ruled out further cuts to welfare. So where is the money for the cuts to capital gains tax and corporation tax coming from?

Rosbif · 21 Mar 2016 at 22:42

Tunney, I don't know specifically but the forecast through to 2020 shows that tax revenues as a % of GDP will be increasing all the way through that period. Taxes (somewhere) are going up and will continue to go up.

Stealth taxes, which is exactly what Labour were famed for and the Tories were so vocal about before they got into power.

Caged · 21 Mar 2016 at 22:42

Tunney said:
Crabb has ruled out further cuts to welfare. So where is the money for the cuts to capital gains tax and corporation tax coming from?

Increased VAT receipts from suppliers of smoke and mirrors.

muon · 21 Mar 2016 at 22:49

Look at the wage growth implied in above projections. If that doesn't happen then any deficit reduction is completely screwed.

Where do you cut given that Education, Defence etc. have had massive cuts over the last 5/6 years already. Health cuts of £30bn already look unrealistic. Spending in the Welfare Cap has already has massive cuts over the last 5 years.

Pensions which sits outside the welfare cap needs to cut or means tested.

Pudney · 21 Mar 2016 at 22:50

muon said:
Page 45 is interesting. Corporation Tax will have been cut from 28% to 17% (lowest amongst the 20 or so developed countries shown). Good luck getting all that money back through the closing of loopholes or international businesses voluntarily giving up next to 0% rates of tax elsewhere to relocate to the UK.

Anecdotally I'd disagree that the cut in rates hasn't encouraged businesses to the UK, although the reform of the CFC rules also helped.

Additionally, given the global crackdown on profit shifting don't be surprised to see tax havens becoming less attractive, either through profit shifting rules or through the haven itself attempting to shed its image as a haven.

muon · 21 Mar 2016 at 22:58

Pudney said:
Anecdotally I'd disagree that the cut in rates hasn't encouraged businesses to the UK, although the reform of the CFC rules also helped.

Additionally, given the global crackdown on profit shifting don't be surprised to see tax havens becoming less attractive, either through profit shifting rules or through the haven itself attempting to shed its image as a haven.

The reality is that a lot of these global companies are actually American. If a global crackdown happens they will just go back home and pay the tax they should have paid in the USA a long time ago.

From what I understand in the USA all foreign income is taxed (although they get credited for anything paid in that foreign country). It is why companies like Apple haven't repatriated foreign profits (after paying 5% or whatever in Ireland for the EU).

So why bother paying 17% in the UK when you will have to make up the difference and pay 35% anyway. Just pay it all at 35% in the USA, much easier and looks better in their home market.

Pudney · 21 Mar 2016 at 23:09

muon said:
The reality is that a lot of these global companies are actually American. If a global crackdown happens they will just go back home and pay the tax they should have paid in the USA a long time ago.

From what I understand in the USA all foreign income is taxed (although they get credited for anything paid in that foreign country). It is why companies like Apple haven't repatriated foreign profits (after paying 5% or whatever in Ireland for the EU).

So why bother paying 17% in the UK when you will have to make up the difference and pay 35% anyway. Just pay it all at 35% in the USA, much easier and looks better in their home market.

There are other countries than the USA. There are also other multinationals that aren't American. GSK, Honda, Samsung, E.On. Four global nationals off the top of my head, all chosen because I didn't want doubles or similar industries and none are American (UK, Japanese, Korean, German).

Tata?
Nissan?
Sony?
Philips?

The list is so long I could bore you endlessly.

It's also worth noting most countries tax foreign income, it's not specific to the US. And what about the US companies operations in Europe? Why would you locate it in the US? That makes no sense given the time difference. It's even worse if you're talking Asian companies given the time differences.

Tunney · 22 Mar 2016 at 00:26

Pudney said:
It's also worth noting most countries tax foreign income, it's not specific to the US.

Most counties don't tax overseas profits. From a bit of Goolging, the only other countries to use a similar system to the US are Chile, Ireland, Israel, South Korea, and Mexico.

muon · 22 Mar 2016 at 01:41

Many of the world's most profitable companies are American. When it comes to technology and IP based companies (like pharmaceuticals) you can be located anywhere. Even with manufactured goods, as electronics are made in the far east you simply need a distribution subsidiary. Distribution is hardly the most profitable thing in the world, it has low margins.

That is why Ireland was so good with its low corporate tax rate and the facility to use the double-irish tax dodge.

Below is a good article on what is being discussed in the US and what policies they may introduce. Looking at things like minimum foreign income taxes. Also companies are actually repatriating and paying 35%. They have no choice other than holding it abroad hoping for a sweet tax deal.

http://www.bloomberg.com/news/artic...stashing-2-1-trillion-overseas-to-avoid-taxes

Also remember that a corporate tax cut is also a cut for all domestic companies which loses you revenue.

antijoke · 22 Mar 2016 at 09:05

How much money does George need to find to balance the books each year?

doodah · 22 Mar 2016 at 09:25

I *think* the deficit is under £70bn ^

This is the simple mathematical reason why Osborne's strategy will lead to financial ruin

Is this the real case (let alone wise) or are the Indy twisting the real world a little?

antijoke · 22 Mar 2016 at 09:26

Would the £13 Billion payment to the EU help that?

If so I can see him being hopeful of an exit from the EU

Raggs · 22 Mar 2016 at 09:33

Boris has stuck the knife in now apparently.

I had to chuckle at this

Tunney · 22 Mar 2016 at 09:34

doodah said:
I *think* the deficit is under £70bn ^

This is the simple mathematical reason why Osborne's strategy will lead to financial ruin

Is this the real case (let alone wise) or are the Indy twisting the real world a little?

The half of this trickery is the asset sell-off. Royal Mail was sold off (minus the pensions liabilities, of course), Eurostar was sold off, RBS was sold off for a massive loss...

This is not a sustainable way of running an economy.

Freakbro · 22 Mar 2016 at 11:30

So George is back in the HOC from 12.30 to defend his Budget ahead of the vote to approve it, I wonder how he is going to explain how he is going to fill the £4.4Bn hole in it now.

Also...

Mr Osborne also has his three fiscal rules - a yearly welfare spending ceiling (already breached); that debt as a percentage of national income will fall every year (already breached) and that the government will create a budget surplus by the end of the Parliament (the clock is ticking).

Has a budget ever not been approved and turned into a Finance Bill? Or is it just a rubber stamping excercise

Though he's been let off the spotlight somewhat with the events happening in Brussels

joeyjojo · 22 Mar 2016 at 11:37

anticonscience said:
Would the £13 Billion payment to the EU help that?

If so I can see him being hopeful of an exit from the EU

Heard on the radio last night that the UK's gross payments to the EU are £350 million per week, but the net payment is only £162 million per week (£8.42 billion per year) after rebates, CAP payments, arts & science funding, etc.

Go to 52.00 http://www.bbc.co.uk/programmes/b074149n#play

We do something like £60 billion of trade per MONTH with the EU, so spending £8 billion a year to stay in is probably good value, hence Osborne is an Innie.

Kemik · 22 Mar 2016 at 11:49

muon said:
Below is a good article on what is being discussed in the US and what policies they may introduce. Looking at things like minimum foreign income taxes. Also companies are actually repatriating and paying 35%. They have no choice other than holding it abroad hoping for a sweet tax deal.

http://www.bloomberg.com/news/artic...stashing-2-1-trillion-overseas-to-avoid-taxes

A lot of companies are actually setting up HQ outside of the US and holding profits that way. It leaves only US activities in the US and everyone else is treated separately. Granted, often the US make up 50% of the company's turnover.

DPT and the likes has a much bigger impact on how companies manage their international tax policies compared to dropping the rate by a few percent. Think of the rate drop as a carrot and DPT as a stick. The stick is much more effective when you have Ireland giving them a below 10% rate.

Mr Jack · 22 Mar 2016 at 11:55

joeyjojo said:
Heard on the radio last night that the UK's gross payments to the EU are £350 million per week, but the net payment is only £162 million per week (£8.42 billion per year) after rebates, CAP payments, arts & science funding, etc.

Even these figures do not represent the money we'd save by leaving the EU because we'd need to recreate many of the functions that the EU currently carries out. It's doubtful we'd be better off at all, even before considering the economic issues of Brexit.

We do something like £60 billion of trade per MONTH with the EU, so spending £8 billion a year to stay in is probably good value, hence Osborne is an Innie.

Nearly all economists, even those few that support Brexit for the long term, say that Brexit would do short term harm to the UK economy. Brexit would badly damage the UK's growth and thus balance sheet over this parliament.

joeyjojo · 22 Mar 2016 at 12:06

Mr Jack said:
Nearly all economists, even those few that support Brexit for the long term, say that Brexit would do short term harm to the UK economy. Brexit would badly damage the UK's growth and thus balance sheet over this parliament.

Shouldn't Gideon be praying for an Out vote then? It could be a Get Out of Jail Free card.