Taxes raised in the three months to September 2009 fell by £15.5 bn compared to the figure for 2008, an overall drop of 13.4%. Most notably, this includes a precipitous fall in corporation tax by £4.7 bn (37.0%) increasingly reflecting the lower levels of corporate profits in the aftermath of the "credit quake". The recession also curbed the receipts from major taxes such income tax which, for the same three months, fell by £4.3 bn (10.9%) and national insurance declining by £1.0 bn (3.9%).
Whilst stamp duties fell on a quarterly basis by £270 million (12.1%), it is interesting to note that the September figure recorded a small £69 million rise, hopefully reflecting a degree of stabilisation in the property and equity markets. However, quarterly VAT receipts were £4.4 bn lower (20.7%); even lower than would have been anticipated taking account of the temporary reduction in the standard rate from 17.5% to 15%.
Recent polling by BDO revealed that only 3 per cent of financial decision makers in the UK believe that the main political parties are transparent enough over their tax policies. 85 per cent state that they would be more likely to vote for a party that showed greater clarity over tax policies.
The lack of transparency has left an overwhelming 93 per cent of respondents fearing that it is now inevitable that tax rises will affect their business after the general election, with 97 per cent expecting tax rises to affect them personally.
Our analysis of the political party conferences shows that none of the proposals made by the parties contained potential tax rises that could make a significant impact upon the fiscal deficit. For example, Shadow Chancellor George Osborne MP proposed that a Conservative government would introduce national insurance reductions for new businesses but he had few concrete proposals for tax rises, while Labour’s Alistair Darling had little to add to the 50 per cent top income tax rate, announced in the 2009 Budget, which will raise less than £2 billion and is already factored into Treasury projections.
Meanwhile the £1.5 billion projected proceeds of Vince Cable’s proposal for a “mansion tax” levied at 0.5 per cent of the value of homes over £1 million, are more than offset by Liberal Democrat promises to take low paid workers out of the income tax net.
It may come as little surprise to see that almost every business is expecting to be hit by tax rises next year, but it is disappointing to see that even after conference season, we are still in the dark over the parties tax policies. UK business and entrepreneurs are on the operating table and the political parties’ are holding the scalpel, but we don’t know what the level of pain will be, or where exactly it is going to hurt.
Business leaders are clearly demanding a proper debate on tax rises as well as spending cuts. All parties should actively, openly and willingly engage with this debate now, and not merely in the febrile atmosphere within a three week general election campaign.
Stephen also recently answered a number of questions on this subject, please click below to find out his views: