The leading economists have warned that the UK will likely face “substantial” tax rises in the coming years, as the government seeks to pay for the cost of its COVID-19 response and public services.
Some top economists told parliament’s Treasury Select Committee on Tuesday that tax rises were likely, although they said increases would likely not happen for a few years.
Paul Johnson, a director at the Institute for Fiscal Studies (IFS) think tank, said:
“It was “probably true” taxes would have to rise.”
The government could raise taxes by up to £20 billion in the next budget, they claimed.
Ministers are looking raising capital gains tax and corporation tax, as well as slashing pension tax relief, according to the reports.
The Sunday Times said the money could be clawed back from pensions, businesses, the wealthy, and foreign aid. It comes after the government spent billions to support workers, businesses and the NHS, for example with the furlough scheme and ‘Eat Out to Help out’.
Chancellor Rishi Sunak is considering hiking corporation tax from 19% to 24% in order to boost revenue by £12 billion next year, the report indicated. Moreover, businesses might need to pay capital gains tax at the same rate as income tax in future.
The Sunday Telegraph reported that Treasury’s measures to help pay for the Covid-19 crisis can also slash pension tax relief. The newspaper also said that the government is considering raising fuel and other duties.
They are also considering to revamp of the inheritance tax system and the introduction of an online sales tax. The international development budget can also become a victim in Treasury reappraisals due to the cost of the pandemic.
The government has already cut aid budget by £2.9 billion from £15.8 billion this year. That is again due to the contraction in the economy caused by the Covid-19 outbreak. However, the Government insists it still meets its obligation to provide 0.7% of gross national income (GNI) to international development.
No one welcomed the proposals. Some showed anger instead.
Marcus Fysh, MP for Yeovil, tweeted:
‘Tax rises are the wrong response to the current situation and Number 10 @BorisJohnson is right to resist them if the Sunday papers have the story right. ‘We need to help the economy not strangle it. These mixed messages are in themselves damaging and must stop.’
Adam Marshall, Director General at the British Chambers of Commerce wrote on Twitter:
‘Hammering businesses, entrepreneurs & investors w/ big tax rises is no way to help the UK economy restart, rebuild and renew. @RishiSunak must consider risks to our still-fragile recovery.’ Treasury sources said that they do not comment on what may, or may not be, in the upcoming Budget.
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