AccountingWEB's anonymous partner considers some of the proposals put forward by Conservative Party leadership candidates in their first week or so of campaigning.
At present, we are governed by uncertainty rather than a Prime Minister. However, by next year there should be at least a little more clarity about the British economy.
Boris Johnson remains the bookies’ favourite, although he seems determined to do anything and everything possible to avoid election.
Ignoring domestic disputes, to date he has made a couple of concrete(ish) tax proposals, which could have drastic but unforeseen consequences.
First, as far as I can see, he has few plans to avoid a no-deal Brexit. I have discounted his suggestions that tariffs will not be due as a result, on the basis that wiser men than our prospective PM have laughed them out of town.
According to the website of one of Mr Johnson’s strongest parliamentary advocates, this will mean that Britain will have to pay £6.5bn of tariffs to purchase goods that come in from Europe. As a quid pro quo, the other 27 European countries will, between them, have to pay just over twice as much, £13.2bn.
While this is being spun as a major win for our beleaguered country, don’t get too excited. If importers are paying £6.5bn, then guess who will eventually foot the bill. Yes, you guessed it, the dear old consumer ie you and me. Business being business we will almost certainly have to pay a mark-up too.
To compound this, I have grave doubts about the proposition that we will really be profiting to the tune of £13.2bn. Surely the obvious solution for any level-headed European will be to source their goods and services somewhere that has full tariff exemptions. We can, of course, do the same but that will take time.
Mr Johnson’s real humdinger comes in the direct tax field. He has promised to raise the threshold for higher rate taxes from £50,000-£80,000. The Institute for Fiscal Studies tells us that this will cost £9bn.
Given that the measure will benefit 8% of the population, most of whom vote Tory anyway, I may well be missing the point but this appears to be equivalent to our dear leader walking across the chamber of the House of Commons saying "Mr Corbyn, here are the keys to Number 10."
To add insult to injury for the poorest in society (who still get votes), the former Mayor of London is planning to raise the starting point for National Insurance Contributions but also increase the top rate band, although he has been rather quiet about this last element recently. None of this is likely to buy the votes of anyone who is out of work or struggling on National Minimum Wage.
The real beneficiaries from this combination of cuts for the rich and adjustments to a stealth tax that the person in the street neither notices nor understands are likely to be wealthy individuals working beyond retirement age – in simple language, Tory voters.
I am struggling to see that Hunt’s strategies will be very much better, although they could be more acceptable to the average voter.
On Brexit, he seems far keener to do a deal and, if I were a betting man, my money would be on JH to get us out (or leave us in) without tariffs.
Tax-wise, he has been silent on income taxes but wants to cut the corporation tax rate to 12.5%. The IFS says that this will cost £13bn.
There is a theory that if you cut tax rates far enough, people will actually pay them. To me, this sounds counterintuitive and why say Google or Starbucks, who pay virtually nothing anyway, would decide to pay more tax when the rate is lower is a little beyond me.
Mr Hunt is also looking to raise the NI starting point to £12,500, which is expensive.
Cynics might say that all of these proposals sound like “fake news”, which the winner will be desperate to forget as soon as he unlocks the front door of Number 10.
I fear that you have not heard the last of me on this subject since as this pair scraps over the next month, there is every chance that they will make even more outlandish and unfunded tax promises in a desperate effort to lay their hands on those keys.
About The Imprudent Accountant
Someone who should know better, but can't resist the occasional rant about the more exasperating aspects of the accountancy profession.