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Warning against 'hasty' tax cuts

13 November 2008
Categories: News , CIOT , Pre-Budget Report 2008
Short-term measures can cause problems, says CIOT

Tax changes made in response to the economic downturn could have unintended consequences, the Chartered Institute of Taxation (CIOT) has warned.

It is widely expected that the Chancellor will announce tax cuts in his Pre-Budget Report on 24 November, to help businesses and individuals through the recession.

The CIOT has stressed the 'vital' need for Government policy-makers to 'think through' new tax proposals and not rush into decisions.

'Although there may be a need for short-term fiscal measures, the Government needs to ensure that any changes make sense in the medium to long term,' said the institute's deputy president, Andrew Hubbard.

 He added: 'History shows too many cases where short-term measures introduced to deal with particular problems have ended up creating more problems than they have solved.

'Getting the balance right will be far from easy, but it is essential that any new measures are properly thought through.'

The CIOT said it believed that the Government is likely to adopt a fiscal stimulus strategy, and ministers should consider one that is not prone to causing problems in the future. One course of action would be to temporarily reduce the rate of VAT as permitted under EU law.

Mr Hubbard remarked that such a move 'would help those on low incomes, as well as small and large businesses. It is relatively easy to implement and can be time limited'.

Categories: News , CIOT , Pre-Budget Report 2008
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