PBR 'will hit high-earners and banks'

The Chancellor will use the forthcoming pre-Budget report to levy more tax rises on high-earning individuals and companies – especially banks, MacIntyre Hudson has predicted.

The chartered accountancy firm suggested that Alistair Darling will utilise the PBR chiefly for political point-scoring and will avoid making any ‘hard tax choices’ until the 2010 Budget.

The Chancellor is likely to place a limit on the ability of businesses to carry forward trading losses so as to increase the tax take from banks’ future profit streams, increase the main rate of capital gains tax to 25%, introduce a new ‘wealth tax’ of 0.5% on fortunes over £1 million, revive Crown preference on tax debts, and reduce to £110,000 the starting point for 50% income tax, according to MacIntyre Hudson.

The company’s tax principal, Nigel May, said that ‘the critical policy challenge of how to curb the public deficit without choking off the fragile recovery will be given little more than lip-service in the pre-Budget report’.

He added: ‘The Government may have a lot to lose economically, but it has everything to gain politically… The [Labour party] will see little point in announcing serious, unpopular increases during its last-ditch attempt to convince the electorate to grant it a fourth term.

‘Instead, we are likely to see… measures that will enable the Government to trumpet its success in helping along the [economic] recovery, while simultaneously talking tough over the banks.’

‘It will not be difficult to persuade voters that the likes of the banking system should not be able to offset losses ad infinitum, given how raw the bailout remains in the minds of the public.

‘This would strike some kind of balance between satiating public anger while avoiding a perverse tax raid on a sector that needs to build up its capital position first,’ said Mr May.

He went on to forecast that Government will ‘up the ante’ in the ‘sport of dragging the Conservatives into a Labour tax agenda’ by introducing further tax increases on high earners.

‘These politically charged moves force the Conservatives into a Catch-22 situation: accept the need for rises and risk dissent in the [Tory] ranks, or oppose the rises and be painted as a party out of touch and out to protect the wealthy.’

Categories: News , PBR 2009