Budget 2012: Doubts raised over Osborne's "five times more" pledge
Osborne's figures on 50p shortfall measures are 'optimistic'
By Jaimie Kaffash | CFO UK | Published 16:23, 21 March 12
Chancellor George Osborne's pledge in his Budget speech on Wednesday that the very wealthiest will contribute five times more than before has raised doubts among experts.
In exchange for cutting the top rate of income tax from 50p to 45p from April 2013 and therefore losing the Treasury around £100 million a year, the chancellor announced new measures that he said would earn the Exchequer about £500 million.
In anticipation of criticism for supporting the rich with a tax cut during a time of deep austerity and swingeing public sector cuts, Osborne announed new taxes that will hit the wealthy, including a rise in stamp duty for properties worth more than £2 million.
"Thanks to the other new taxes on the rich I've announced today, we'll be getting five times more money each and every year from the wealthiest in our society. So the richest pay more," the chancellor told parliament.
HM Revenue & Customs published a report on Wednesday stating that between £16 billion and £18 billion of income was estimated to have been brought forward to 2009-10 to avoid the 50p tax rate. The tax yielded less than £1 billion last year, HMRC said, compared with original estimates of £2.5 billion.
To make up the £100 million shortfall, the government expects £225 million a year to come from the 2 percent increase on stamp duty for properties worth £2 million and above.
However, the bulk of the revenue will be raised from a new £50,000 cap on the amount of income tax allowance that can be claimed through reliefs. The Treasury said it expects around £300 million a year to be made in 2014/15 from the policy change.
But Bill Dodwell, tax partner at Deloitte, said the figure was optimistic.
"The chancellor was clear that reliefs that are already capped will not be affected. So it will not affect enterprise investment scheme relief, or pension relief."
Dodwell said it was unclear what it would affect. Gift aid is one obvious area, but the government has not said whether this would be included in the limits. "We have only a very limited red book and we don't have any sensible explanation on what they intend to do."
Another relief is the business property renovation relief, he said, but he added: "If there are more than 12 people claiming that, we'll all be stunned.
John Whiting, tax director of the Office of Tax Simplification, said: "It seems optimistic," adding that more detail was needed.
However, he said: "It only takes one billionaire. You can raise £300 million from not very many people."
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