Taxing the rich
The Imprudent Accountant considers newspaper leaks suggesting that the government will implement a restriction on pensions tax relief and a new mansions tax.
Many subscribers will have heard the rumours over the weekend that the government is planning restrictions to pensions relief for higher rate taxpayers and the introduction of a mansion tax.
While this will undoubtedly sound like a terrifying prospect for many accountants and their wealthy clients, like me, anyone with a long memory is probably already laughing.
You will recall that George Osborne (remember him?) loved to leak stories to the papers, typically The Sunday Times, about worrying tax hikes. Mr Cameron’s sidekick would then stand at the dispatch box and deliver a Budget speech in which he boasted about eliminating the tax rises that he had not intended to introduce in the first place.
Such was the success of this far from subtle strategy that after Mr Osborne departed to a role that now enables him to be the recipient of such leaks, Philip Hammond followed suit.
I am therefore taking the latest hints with more than a pinch of salt. Indeed, it is a long time since there was a Budget (the sentence could stop there!) ahead of which there wasn’t a rumour about high rate pensions tax relief.
Having said that, there is no question that if Mr Johnson delivers on all of his manifesto spending promises, the country will be desperately in need of additional finances.
Indeed, with HS2 likely to cost every one of us a fortune and a commitment to hold rates of income tax, NIC and VAT steady, there will need to be some tough fiscal decisions.
However, I don’t see the current government kicking its favourite voters and party donors in the teeth just after getting the party back into power by restricting their pensions tax relief.
A mansions tax is even more far-fetched. The last thing that this government needs is an exodus of the mega-rich.
In any event, in order to implement a property-based tax, it would presumably be necessary to revalue properties. That exercise would certainly boost employment but must take years, particularly if, as one might reasonably expect, the richest in the land use their expensive lawyers to indulge in lengthy appeals against unfavourable valuations.
The only slight novelty that I have seen in the media coverage over the weekend lies in the fact that the Budget is still a month away. In the past, Chancellors of the Exchequer kept their powder dry until the weekend before the big event.
The early start promises many more weird and wonderful tax threats, giving Sajid Javid the opportunity to fire up his backbenchers for hours on end on March 11, as he lists tax rise after tax rise that he is not going to implement, and which nobody would have thought about but for his team’s judicious chats with assorted financial journalists.
The big question is where he is going to find additional tax revenues. Personally, I can’t see this government taxing the rich first time around for obvious reasons.
If they want to get a trade deal with the United States, attacking the Googles and Amazons of this world will also prove problematical.
Unless the plan is to ignore those bold tax-freezing manifesto promises, perhaps the way forward will be some stealth taxes that largely hit Middle England, without causing visible offence to those who voted in a government that promised to “Get Brexit Done” but very little else.