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EDITIONS
Wednesday, 27 November, 2002, 18:07 GMT
Pre-Budget report: The tax expert's view
John Whiting

Whilst admitting to economic clouds around, such as slower economic growth, the chancellor was keen to stress that the UK has a strong economy.


It cannot be ruled out that he will have to come back and raise taxes in a couple of years time

There are a lot of positives around - low interest rates, low inflation, and low unemployment. He stressed that our friends in Europe and further afield are a deal worse off than we are in the UK.

We had the admission that there will have to be additional borrowings - some 10bn or so more this year - but not a great increase and no sign yet that borrowings will spiral and cause him to have to go for further tax increases in the future.

But given that so much is predicated on the growth in the economy being at the top end of most peoples' forecasts, it cannot be ruled out that he will have to come back and raise taxes in a couple of years time.

Welcome news

There were a number of things for business to look at - and in some cases welcome.

The oil industry will welcome the abolition of the North Sea royalty regime, which is partial compensation for the extra tax levied on the industry in the April Budget.


We have a chance to discuss the merits of bringing in a simpler flat-rate VAT regime for modest-sized businesses

Of wider significance was the commitment to take forward the consultations on reforming corporation tax generally.

Changes won't happen until 2004. Inevitably there were some swipes against avoidance with what Mr Brown referred to as "abuses" of the VAT regime, employee benefit trusts and other areas under attack.

More consultations

There were a lot of announcements about consultations.

This has to be the correct use of this sort of statement - come up with some new ideas, discuss them and potentially bring in the changes in the main Budget.

So we have a chance to discuss the merits of bringing in a simpler flat-rate VAT regime for modest-sized businesses, building on the scheme already available for those with turnover of up to 100,000.


Will people apply as they should, working their way through the various forms?

Many businesses will welcome the promise of a review of Employers Liability Insurance - an issue that has caused many small businesses problems (and given the Chancellor a small bonus with extra Insurance Premium Tax).

Enterprise is to be encouraged in less well off areas - those with high unemployment - with less red tape, the foreshadowed abolition of stamp duty and the idea of allowing local authorities to keep extra rates they generate from any new enterprises.

Bioethanol?

The pre-Budget report is sometimes called the green budget and there were greenish tinges with the possibility of landfill tax rises and reductions in duty on biethanol road fuel.

We had the expected emphasis on the giveaway nature of the Working Tax Credit and the Children's Tax Credit which arrive in April next year.

The chancellor was expected to take the opportunity to stress how generous these benefits are, if only to encourage people to apply for them.

That in many ways will be the acid test - will people apply as they should, working their way through the various forms?


Overall, this was a statement all about maintaining - or boosting - confidence

Pensioners were not forgotten - far from it. The new pensioners tax credit comes in from next October and there is a good deal of money there for those on lower incomes - a couple on 150 per week can look forward to an extra 21.50 a week.

He spoke of an extra 2bn available for pensioners so it is clearly worth watching developments and being prepared to fill in the necessary forms.

Half full?

Talking about pensions, there was welcome confirmation from the chancellor that the tax-free lump sum on retirement is safe, as is the tax relief for those contributing to pension funds.

Changing these would have damaged confidence - hardly what is needed at this stage.

Overall, this was a statement all about maintaining - or boosting - confidence.

We are clearly meant to focus on a glass (at least) half full rather than one half empty!


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