All major Parties’ Tax policies – as given by their Manifestos – give general election voters a misleading impression of tax over the next 5 years.
That’s the view of Robert Salter, a Tax Technical Director with leading audit, tax and business advisory firm Blick Rothenberg. He said: “The Labour manifesto, for example, suggests that only around £8bn of tax raises are planned by a Labour Government, which is essentially nothing when total Government tax revenues are ca. £1,000bn per year.”
He added: “Criticisms can also be raised on the Conservative Party manifesto, with the NIC cuts they are promising being only really affordable if there are tax rises elsewhere (or significant spending cuts), whilst the Conservatives’ proposal for a special personal tax allowance rate for pensioners – so that they avoid tax on their state pensions – has no wider economic rational.”
Robert said: “While economic growth might provide all parties with some additional tax revenues – which is clearly what they are hoping for, the fact is that this is unlikely to provide any of them with significant extra tax revenues.”
He added: “It is equally valid to critique the policies of the Liberal Democrat, Green and Reform parties. None of the parties are fully addressing the various tax anomalies within the UK tax system which can result in taxpayers having marginal tax rates of 55% – 60% (or even significantly higher in some situations), despite the UK’s official, top rate of income tax being only 45%.”
Robert said: “In addition, many of the tax measures which have been proposed will simply not work. They will not bring in any significant amounts of tax, or alternatively, could create additional negative behaviours from taxpayers and drive inflation or extra Government borrowing.”
He added: “For example, all of the parties talk about attacking the tax gap – the taxes which HMRC believe are due, but which aren’t paid for one reason or another. However, their plans include little meaningful analysis of how this tax gap will be reduced and none of the parties publicly recognise that the majority of the tax gap is caused by small business non-compliance – that is, errors or deliberate actions on the part of the smallest businesses in the UK. Instead, the manifestos talk about targeting tax avoidance amongst major firms, which according to HMRC’s own figures is only a very small part of the overall tax gap.”
Robert said: “Other tax plans which have been mentioned are either very simple to avoid – such as the Lib Dems plans to have a tax on share buybacks by FTSE companies, which will probably bring in no actual tax.”
He added: “Alternatively, the Greens proposals to change the NIC rules – so that the standard 8% NIC rate applies to all wages including those above £50,270 per annum – will result in an effective marginal tax rate of 48% (40% tax and 8% NIC) for middle-earners, whilst the sharp tax cuts promised by Reform (e.g. with the personal tax allowance increasing from £12,570 at present to £20,000) are largely unfunded and could easily trigger inflation.”
Robert said: “Given that all parties are either being coy about their real tax plans, or not admitting to the real risks which would arise from the implementation of their manifestos, it is reasonable for taxpayers to challenge all of the major parties on tax and to demand answers. Otherwise, taxpayers will only have themselves to blame when they face some nasty tax shocks over the coming 5 years!”
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All Major Parties’ Tax Manifestos could lead to nasty shock for taxpayers
