Yesterday the Chartered Institute of Tax issued a warning to the chancellor Gordon Brown Alistair Darling to be careful about any tax cuts to stimulate the economy out of a downturn. Whilst conservative and liberal spokesmen can say what they like knowing that they can change their minds before there is any chance that their proposals would be implemented, labour must be much more careful.
The warning is simple - get it wrong and you could create problems for the future.
The idea put forward is to reduce the rate of VAT temporarily (which is apparently allowed under European Law).
The problem is that even if it is a very good idea (and a reduction in the VAT rate probably helps those on lower incomes more than those on higher incomes and is therefore a sensible measure when unemployment is rising), it does not have the same political benefit as a 1p cut in income tax, which we all understand.
An alternative suggestion from small businessmen is a reduction in employer’s national insurance - what employers have to pay in addition to gross salaries. This could be a temporary measure as well and could help keep a few people in jobs. But the government is more likely to pay employers something to take on new employees as an obvious way of trying to reduce unemployment
No comments:
Post a Comment