Posted: 10 March 2010
Issue: Online only
Categories: News, Update
Keywords: Budget 2010

Tax rises to be delayed until after election: BDO

Alistair Darling will deliver a ‘phoney’ Budget on 24 March that will avoid introducing high-impact tax measures and instead be geared towards electioneering, according to BDO LLP.

The accounting company has forecast that it will be the second Budget of the year – following the general election expected in May – in which a newly elected administration will be forced to make ‘tough decisions’ to tackle the public deficit.

This means individual taxpayers and businesses will have to ‘steal themselves for a frustrating period of uncertainty as party politics overshadow the uncomfortable fiscal imperative to raise significant additional tax revenues as a contribution... to curb the unsustainable fiscal deficit,’ warned BDO.

The firm predicted that the chancellor will this month confirm tax rates and allowances announced in the 2009 pre-Budget report, and he may augment the 50% income tax rate for high-earners with a ‘super tax’ on income over £1 million.

Mr Darling could well respond to opposition calls for the corporation tax rate to be cut from 28& to 25% (or lower), and will certainly introduce the further measures seen by HMRC to be essential to combat pre-packaged tax schemes and other perceived tax avoidance.
 
‘I fear that the March Budget is bound to be more about “Punch ‘n’ Judy” politics rather than important fiscal reforms,’ said senior BDO partner Stephen Herring.

‘In the wake of the credit quake, we have seen a £42 billion fall in tax collections. This leaves the chancellor very little room for any tax cuts to curry favour with voters but, equally, he dare not raise taxes significantly… only a few weeks before a general election.

‘We can expect a “phoney” Budget on 24 March, with hard-hitting, significant tax-raising measures deferred until the second 2010 Budget,’ added Mr Herring, whose company anticipated that VAT rise to at least 20% later this year, regardless of the colour the government, while income tax and National Insurance will also be increased.

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