Osborne is stuck on a great tax escalator – and it’s only going up

Those who took a foreign holiday this Easter may have whiled away the hours in the departure lounge by studying the small print of their booking – in particular the bit detailing the extortionate taxes attached to the cost of their flights. It’s always a cough-splutter moment (and air passenger duty has gone up by a further eight per cent this month).

Yet it’s not just the hidden costs of a holiday. Families know that wherever they turn, they are paying more, and will continue to do so. The Budget might have attracted derision for reducing the top rate of tax, but its actual message was the opposite: one of perpetually rising taxes, stretching far into the future. The fiscal challenge facing this Government, and those that will follow it, gets tougher, not easier. Indeed, we should ask ourselves why so many of our politicians find it easy to get exercised about tax cuts that are marginal in fiscal terms, when they should be steaming about how taxes are rising relentlessly for those on middle incomes, who form the backbone of the economy.

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Britain’s broken tax system

Some points on the Barclays tax “scandal”.

1. Both tax “loopholes” Barclays was intending to exploit are quite widely used by UK banks, so much so that Barclays, advised by both its auditors and lawyers, really didn’t think there would be in any problem with them. It assumed they would be approved.

2. The fact that they weren’t shows that the environment around big corporations and tax has changed. It’s becoming politicised and quite unpredictable.

3. In the past, the Revenue has tended to tolerate tax avoidance by big multinationals as a way of keeping the UK tax competitive with overseas jurisdictions. There are far more global corporations headquartered in the UK than any other European country, bringing abundant, high value employment to the capital, and that’s plainly got something to do with a relatively lenient tax environment.

4. The Coalition managed to stem the flow of corporate exits from the UK by killing off the previous Government’s threat to tax the profits of overseas subsidiaries, though it has not succeeded in reversing it. WPP, the advertising goliath, said it would consider redomiciling back to the UK as a result of the change, but hasn’t yet done so. The crack down on tax avoidance may partially undo Coalition attempts to ensure the UK remains competitive on business taxation.

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