Osborne to unveil private jet tax

Crackdown on the better-off will be announced as government seeks higher tax revenue to close budget deficit A £4bn crackdown on tax avoidance by the better-off will be announced by George Osborne on Wednesday as the government seeks higher tax revenue to close the UK’s budget deficit. The chancellor will announce plans to prevent wealthy individuals disguising their true level of earnings to avoid paying income tax at 50%. Osborne will say HM Revenue & Customs will be able to boost tax receipts by £1bn a year over the next four years by action against so-called “disguised remuneration”, where tax is avoided by the use of employment benefit trusts and pension schemes. A range of measures are expected to be announced, although the details will not be released until the budget speech to prevent the tax-planning industry finding ways round the rules. Despite an improvement in the public finances since the record peacetime borrowing of 11% of GDP in 2009-10, the chancellor is concerned that the better-off are able to find ways round the 50% top rate of income tax introduced by Alistair Darling in the Labour government. He announced tax avoidance measures in December designed to boost tax receipts by £2bn over the next four years, but now believes tougher enforcement by HMRC and the additional measures will double that figure. In a separate move, the budget will be used to announce plans forcing executives and celebrities who use private jets to pay air passenger duty for the first time. Osborne plans to consult on the details but hopes the proposals will raise tens of millions of pounds. The budget will also see a further £100m provided for local authorities to repair potholes caused by the severe winter weather. On top of the funding already announced by Phil Hammond in February, this would mean a total £200m package to help fill in the damaged roads. The Institute for Fiscal Studies, meanwhile, has warned that low-income households were already suffering from the Treasury’s austerity measures before the impact of the cuts planned for April. The average British household has seen its real-terms income fall by £365 since 2008 in the worst three-year squeeze since the early 1980s, the research said. It found that the income of the median UK household had fallen 1.6% over the period. The respected thinktank said its study, commissioned by the BBC to examine the effects of cuts, showed pensioners and low-income workers were among the worst hit by the recession. The bottom 10% of households saw their real income fall by 2.1% between 2008 and 2011, the IFS said. Pensioner households saw their average income fall by 2.4%. But the richest households are even harder hit in percentage terms by a combination of the 50p tax rate and a reduction in tax relief on pension contributions, sending their income down by 3.8%. Cuts in housing benefit and tax credits from April are expected to make the situation worse for many families who have relied on state welfare to cushion the blow from cuts in working hours and pay following the financial crisis. However, the IFS said these changes to tax and benefits would be offset by the increase in personal allowances. A separate report on Monday from the Oxford University Centre for Business Taxation said that despite the government’s “harsh programme” of budgetary austerity there was a good chance of the UK escaping a double-dip recession. The paper identified seven factors that have influenced the success or failure of attempts to repair public finances around the world in the past and found five of them were favourable for the UK. These included the size of the deficit, the credibility of the government’s plan, the skewing of the deficit reduction towards spending cuts rather than tax increases, and the depreciation of sterling before and after the programme was announced. The two factors that pointed in the opposite direction were that fiscal consolidations were less effective when other countries were also cutting back and worked best when there was scope for interest rates to fall. “Reduced planned spending cuts would not necessarily increase short-term growth”, the Centre for Business Taxation said. Budget 2011 Tax avoidance George Osborne Budget Larry Elliott Phillip Inman guardian.co.uk

Posted by on March 22, 2011. Filed under News, Politics, World News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.