Pre-Budget Musings
I am sure that it has not gone unnoticed by my readership (of three - thanks go out to my mum and dad and my wife, Sarah) that it has been quite some time since I last wrote an article. This has mainly been due to spending my spare time advancing my professional qualifications. However, I now have a bit of a break before I (hopefully) start a master’s in taxation which, dear readers, means I have been able to dust off my soap box and shall be climbing on with frequent abandon in the coming months. Strap in, this is a long one.
The world has been rather uneventful since I last wrote an article in January last year… but I am sure I will find something to write about.
The Election
We had a general election eagerly voted for by the masters of strategy, Corbyn and Swinson. It worked out extremely well for them. Swinson is now jobless, and Corbyn is stepping down as leader of the opposition. Every cloud. We now have a Tory party which has an overwhelming majority in Parliament, meaning it has carte blanche to do as it pleases. I assume Johnson (I am not calling him Boris; he is not my friend) sent a hamper to each of Corbyn and Swinson as a sign of gratitude for enthusiastically bowing to his desires and handing him unchecked power for the next five years. Labour and the Lib Dems really nailed the period between 2016 and 2019, didn’t they? But hey, ‘they won the argument’. Which is the important thing to remember.
Chaos AD
What then does an unchecked Tory government have planned for the UK tax system? So far it looks like chaos (which comes as no surprise). Sajid Javid, whose legacy will be a 50p that no one wanted, and which commemorates the only time a country has imposed sanctions on itself, having served as Johnson’s Chancellor for a little over 6 months was unceremoniously dumped from Cabinet at the last reshuffle. Whilst not actually sacked, his position apparently became untenable due to Johnson’s megalomaniacal desire to sack all of Javid’s staff and replace them with those selected by No. 10. This was too much for Javid, the great man of integrity, the man who had the damascene conversion from “We are stronger, safer and better off in a reformed EU” to “if… the choice was [sic] between no deal or no Brexit, I’d pick no deal”, and so he quit. Javid’s bowing to populism and cringeworthy attempt to attain the leadership and curry favour with Johnson clearly backfired. Contrary to much evidence, there does appear to be a limit to the hypocrisy that even a Tory can swallow. Javid has now been replaced, only four weeks before we are due a budget on 11 March, by Rishi Sunak.
This is the strong and stable government promised by the Tories. As noted above, honourable mentions should also go to Swinson and Corbyn for this mess.
The 11 March Budget – Tampons and Tax Evasion
Where does that leave the Budget which is due on 11 March? Sunak has said it is to go ahead which means he will have had four weeks to cobble it together. Just what the country needs, a rushed Budget. Nevertheless, we can look at the Tory manifesto to get some idea as to what it will include. Unsurprisingly the manifesto was low on substance and high on meaningless platitudes (“Get Brexit Done, Unleash Britain’s Potential” – what does that even mean?), but let us try to sift through the populist rhetoric and consider some of the claims:
The Tories have promised not to raise the rates of income tax, National Insurance or VAT;
The National insurance threshold is to be raised to £9,500 – the ‘ultimate ambition’ is to ensure that the first £12,500 of earnings are tax free;
Freedom from the EU will mean that the UK government will be free to abolish the tampon tax.
(I should just like to consider this claim for one moment. It is correct that VAT on sanitary products is an EU requirement. I will be the first to admit that this is not one of its crowning glories. Nevertheless, when the UK entered the EEC in 1973 it had the opportunity to agree a once and for all set of zero-rated products as part of its entry, and by 1975 (Harold Wilson’s Labour government) had done so. Government at the time clearly thought it fair that women pay tax for their periods and consequently female sanitary products were not zero rated. In fact, despite Member States being able to apply a reduced rate of VAT at their discretion, the full rate of VAT was applied to sanitary products until 2000 (under Blair’s government) when it was reduced to 5%. As far as I can tell 5% as a minimum reduced rate of VAT was not set until the 2006 Council Directive 2006/112/EC, so presumably the Labour government could have reduced the rate further (for example Ireland had set VAT on female sanitary products to zero). VAT is not my speciality, so I am happy to be corrected on this if I am wrong. Irrespective of that point, in 27 years of membership, UK governments, both red and blue, thought it fine for women to be taxed on being women and at the highest available rate. When politically expedient this issue occasionally rose its head, and it became one of the rallying cries for Brexit before the 2016 referendum. Nevertheless, the EU had already agreed to implement changes to allow Member States the flexibility to apply a zero rate to female sanitary products before the referendum in 2016 – a change Cameron disingenuously claimed as his own. I may have digressed a little, but the point I am trying to make is that this claim that it is the shackles of the EU that imposed this tax is not entirely fair. The UK had the opportunity to zero rate female sanitary products on entry to the EEC but chose not to. The UK could have reduced the rate on sanitary products at any time in the 27 years before it chose to (and probably could have reduced it further when it did). In addition, the EU is now moving towards allowing Member States to apply a zero-rate tax in any event. It seems staying in the EU or leaving it, we would eventually have seen the end of this inequitable tax either way).
There will be a review of Entrepreneur’s Relief, a measure which the Tories believe has not delivered on its objectives (no details provided);
There is to be a new anti-avoidance and evasion law which will:
Double the maximum prison term to 14 years for individuals convicted of “the most egregious tax fraud”
Create a single “beefed up” Anti-Tax Evasion unit in HMRC
Consolidate existing anti-evasion and avoidance measures and powers
Introduce a new package of anti-evasion measures;
Implement the Digital Services Tax.
Unfortunately, there is not a great deal of substance to these pledges for me to comment on. We will simply have to wait for 11 March to see which are implemented. Given Johnson’s track record of carrying out his promises, expect none to go ahead.
One area that does deserve a little attention is the Digital Services Tax. It is suggested that under this tax tech giants will be forced to pay tax in the UK on sales generated in the UK. This in itself is not a bad policy. It is a reaction against companies such as Amazon, Facebook and Google paying little tax in the UK and yet generating huge revenues here. The measure will impose a 2% tax on these revenues and is due to be implemented on 1 April this year.
Javid’s plans
Outside of the manifesto, Javid had been pondering the introduction of a wealth tax levied on expensive properties. This is idea was, not entirely surprisingly given his chums, ruled out by Johnson, perhaps in the hope of ensuring future paid-for holidays to Mustique. Another proposal by Javid was to further restrict pension tax relief on earnings above £50,000, further pursuing the policy of encouraging profligacy now and impecunity in retirement. It remains to be seen whether Sunak picks up any of these policies (or the master of puppets at No.10 allows him to).
The Home Office’s bizarre announcement
This is slightly off topic, but I feel compelled to comment, nevertheless.
Priti Patel, the renowned intellectual, who is fighting for higher penalties for ‘counter-terrorist’ activities, has decided to pursue the populist and dog whistle racist policy of not allowing ‘low skilled’ workers to come to the UK in the future, the ‘stop ‘em coming over ‘ere and nicking our jobs’ policy as I like to call it.
A lot has been written about this, specifically about the use of the jarring and disparaging term ‘low skilled’, and I do not propose to comment too much, I suspect by now my thoughts are clear. I assume the irony of a Home Secretary implementing a policy which even she admits would probably have meant she would not be here now, is not lost on readers. There are however a couple of points I would like to make on this policy.
She is actively encouraging educated and skilled people to come to the UK and ensuring others stay away. Aside from the obvious unfairness of such a policy, I find this bizarre. We have an abundance of educated and skilled people being churned out by our higher education institutions and universities, all eager for work. Just ask any aspiring trainee solicitor if they want more competition for training contracts. And yet we have fruit rotting on trees because there is no one to pick it. Why are we encouraging immigration in sectors where we do not need it at the expense of sectors where we do? Aside from the racist and classist undertones to this policy, it just makes no sense. Ask business where their needs are, in the boardroom or on the ground?
The immigrant workers that she considers ‘low skilled’ have improved my life no end and have become my friends. I am going to sound like a bit of a middle-classed idiot now, but I’ll take that on the chin. My personal trainer is Portuguese, my yoga teacher is Italian, my cleaner is Polish, the guy who serves me coffee in the morning is Latvian working in a coffee shop owned by a Spaniard. I would class all of these people as my friends, all of whom work hard, pay their taxes, add to the community and are a joy to spend time with. Why are we actively trying to stop these people, who improve our lives so much and in so many different ways, from coming to our country? It makes me weep and makes me ashamed to call myself British.
I am pro-immigration in all sectors, be it the so-called ‘low skilled’ or the ‘high skilled’ sectors. I think immigration has resulted in London being one of the greatest cultural melting pots on earth. The food, art and music that is available to residents of this great city as a result of immigration is incomparable. I am a product of immigration, my mother’s side of the family is Irish, my wife’s family is Polish, my business partner is Polish, my mentor is Swiss, my clients are from all over the world. Immigration is inherently a good thing. It broadens your horizons and outlook, it enables you to learn from different cultures, it improves economies and business, it makes you more empathetic. We are moving away from this to inward looking isolation. Fear of ‘other’. In the words of the great Yoda ‘Fear is the path to the dark side. Fear leads to anger. Anger leads to hate. Hate leads to suffering’. This is the path our government is setting us on. In conclusion, Johnson is a Sith Lord and Patel his apprentice (allegedly…).
