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Chancellor takes up CIOT Institutes' proposal for fewer Budgets

THE Chartered Institute of Taxation (CIOT) has welcomed the Chancellor's announcement that the Government will be reverting to a single annual fiscal event. The CIOT, along with the Institute for Government (IfG) and Institute for Fiscal Studies (IFS), had called for this move in an open letter to the Chancellor in September. The letter contained some early recommendations from a project the three organisations are undertaking to look at how to improve Tax policy making. This will lead to a full report in January 2017. CIOT President Bill Dodwell commented:- "This is a welcome move from the Chancellor. Tax change is one of the greatest causes of Tax complexity, and having two major fiscal events a year encourages government to keep fiddling about with the system.  No other major economic power feels the need for 2 big sets of Tax and spending changes each year. The Chancellor has sensibly acknowledged that doing less will enable HMRC and the Treasury to put more time and effort into making sure the changes they do make are effective and well targeted."  The relevant part of the letter, signed jointly by Bill Dodwell for CIOT, IFS Director Paul Johnson and IfG Director Bronwen Maddox, read:- "Return to a Single Fiscal Event. The last 2 decades have seen a proliferation of measures in Budgets and very long finance bills become the norm. In effect, we now have a March Budget and a November / December Budget. The time has come to revert to one principal fiscal policy event a year (while recognising there may still be a need for technical changes at other times of the year). Reducing the frequency of new significant changes of direction would release resource for better consultation, produce higher quality legislation and more effective implementation, make life simpler for taxpayers, and potentially increase the impact of measures concluded upon. We also think that Budgets should return to being principally a vehicle to announce revenue measures, rather than spending or other policy changes."

Cautious welcomes for the package of measures designed to help low earners

THE Low Incomes Tax Reform Group (LITRG) has given a cautious welcome to measures in the Autumn Statement aimed at those on low incomes.  LITRG Technical Director Robin Williamson commented:- "Headline increases in the personal allowance do not generally benefit the lower paid as much as the higher paid. However, the higher benefit awards, reductions in marginal deduction rates and increases in the living wage also announced today make the package of changes as a whole more attractive to the lowest earners. When the personal allowance is increased, those on middle and higher incomes generally gain more than those on lower incomes. Recipients of means tested benefits such as Universal Credit benefit still less, because their benefit is withdrawn as their net income increases. Thus, if (let us assume) the personal allowance is increased by £1,000, a basic rate taxpayer who did not claim means tested benefits gains by £200, while a Universal Credit claimant would gain by only £70 because 65% of their Universal Credit would be clawed back. (The same does not apply to Tax Credit claimants whose credit is assessed on the basis of their gross, rather than net of Tax, income.)  Obviously, people whose incomes are so low that they are not subject to Tax at all see no benefit from increases in the Tax threshold, so other ways must be found of helping them financially. The increase in the national living wage from £7.20 to £7.50 an hour from next April is of course welcome, although smaller employers must be given plenty of warning about changes to the whole suite of rates for the national minimum wage and that those new rates also apply from next April, as they will normally expect rises to happen in October and will therefore have to prepare more speedily than they would otherwise.  The reduction of the Universal Credit taper rate on earned income from 65% to 63% is a small step in the right direction, in that it not only increases the Universal Credit received by the claimant, it also reduces the disincentive faced by those on high marginal deduction rates to make financial progress through work. If the Government finds itself with more to invest in encouraging work and in work progression among the low paid, they would do well to consider reversing earlier cuts to the work allowance, the main work incentive element in Universal Credit.  Another way of assisting those on incomes below the Tax threshold would be by raising the personal threshold for NIC to a sum closer to the personal allowance, while maintaining the lower earnings limit; the point on the income scale at which workers become entitled to a national insurance record; at the same level."