Tax should not be used as a political football, used to score easy goals, says ACCA (the Association of Chartered Certified Accountants) in response to Chancellor Alistair Darling’s Pre-Budget Report (PBR).
“The so-called ‘supertax’ on bank bonuses is actually a levy, a one-off charge aimed at dampening down the political heat surrounding bankers’ bonuses,” says Chas Roy-Chowdhury, head of taxation at ACCA. “The company will have to pay a 50 per cent levy on bonuses above GBP25,000. It could mean that banks will rethink their bonus and remuneration packages. Banks could end up not paying bonuses at all.
“Given the need for banks to pursue robust “long termist” remuneration schemes for its high earners, we can accept a levy that targets the institution rather than the individual. Bonus payments should be part of a company’s longer term view. But if this levy is justified this year, then it should also be justified in future years, where bonus payments are paid on a single year basis, rather than across a span of years.
“The clear message from today’s PBR is that we will all have to wait until after the next election for the real, hard hitting changes,’ continues Roy-Chowdhury. “The massive challenge ahead is to design a fiscal policy that tackles the UK’s deficit, which is estimated at £178 billion. Measures to fill that gap will be a focus for the government after the General Election in the Spring.
“While some tax increases were announced in the last Budget – such as the return of VAT to 17.5 per cent, the National Insurance increase and the new 50% rate of income tax – the really painful measures will come in the post election era.
“There was not a lot of macro-economic policy in today’s PBR,” adds Roy-Chowdhury. “The tax increases and the bonus levy announced today will have limited impact on the UK’s deficit, but they will be painful for individual tax payers and for businesses.
“Underlying this PBR there is a whole raft of anti-avoidance measures,” he concludes. “Whatever the outcome of the election, I predict a tough tax regime in 2010, which will tackle avoidance measures and chase payments.”
