The revolt is only going to happen if Sunak goes ahead, which judging from the article it’s not likely to happen.
One thing that would energise the economy is opening up, trouble is that’s not Sunak’s call and you’re asking a lot from him to make up the huge losses we’ve had in revenue since COVID arrived.
Tax reform should happen in 2022, no ifs or buts.
Full article from the Telegraph below…
The Chancellor risks a Tory rebellion if he pushes up capital gains tax threatening investors’ incomes, a leading Conservative MP has warned ahead of next week’s Budget.
“If you were going to align income tax rates to capital gains tax, I think it would be extremely problematic on Conservative backbenches,” said Mel Stride, chairman of the Treasury Select Committee.
Capital gains are taxed at between 10pc and 28pc – lower than the 20pc to 45pc level for income tax.
It is thought that Rishi Sunak could consider closing the gap over fears it is unfair, and because small companies could try to classify more income as capital gains to benefit from the lower rate.
Mr Stride said a wider revaluation of tax rates could also be worth considering. “If you are going to get lots of pieces now in play, as is quite possible across the tax terrain, I think the Government should try and grapple with some of these tax reform issues that it has ducked in the past, if it possibly can,” he told a Resolution Foundation event.
Corporation tax could also be hiked, with Mr Sunak understood to be considering reversing much of his party’s work to cut the rate, which has fallen from 28pc in 2010 to 19pc.
He could raise it as high as 25pc, grabbing an extra £18bn from businesses – something Labour opposes.
“It is not the time now to be putting up taxes on families and businesses that are struggling,” said Bridget Phillipson, shadow chief secretary to the Treasury.
“Not only can they not bear that, but it would hamper the recovery that we want to see.”
However Mr Stride said higher corporation tax looked “inevitable” as the Chancellor has few other options to raise large sums of money.
“If we end up at 23pc or a bit under and still the most competitive in the G7, given it raises about £3bn per percentage point increase, when you are having to take tough decisions about where to go, it is inevitable I think the Government will go into that place,” he said.
“It is undoubtedly the case that it is the sign in the shop window saying we are open for business, but it is just one of many, many things that businesses consider. If it was all about corporation tax, they would all be in Ireland, Switzerland or Luxembourg enjoying the rates there.”
Landlords could be hit particularly hard by the double whammy of higher taxes.
The proposed capital gains hike would cost the average landlord an extra £6,800 in tax when selling, according to calculations by Hamptons. Tax bills for London landlords, who have typically enjoy the biggest gains, would rise by almost £27,000 on average.
Higher-rate taxpayers would be hit by a 40pc levy on capital gains rather than 28pc. The analysis assumes landlords have not already used up their £12,300 annual tax-free allowance.
Buy-to-let owners who have moved their property into a company structure would suffer a 25pc rise in their corporation tax bill if the increase to this levy is implemented, Hamptons added.
The tax bill for the average limited company landlord with one buy-to-let worth £190,000 would rise from £968 to £1,223. This is based on the assumption they have a 75pc interest-only mortgage and earn £11,210 a year in rent.
Their annual net profit would fall from £4,129 to £3,874 – although this is still more than the average profit of £3,203 made by a higher-rate taxpayer who owns their buy-to-let in their personal name.
They will also pay more when they come to sell their property. Landlords who own their properties via a limited company pay corporation tax, rather than capital gains tax, when they sell them.
Mr Stride’s comments came as the former head of the UK’s fiscal watchdog warned against an “aggressive” squeeze on the public finances as speculation mounts over a tax raid next week.
Sir Robert Chote, who led the Office for Budget Responsibility until last autumn, told an Institute for Government event: “You don’t want the ratio of debt to GDP to ratchet up and up with each economic cycle, so you need to bring it down during ‘normal’ times.
“But you wouldn’t want to do that particularly aggressively or particularly rapidly so as to derail the recovery. And given favourable funding conditions at the moment, there doesn’t seem to be a pressing need to do so.”
On feared rises in corporation tax, Sir Robert stressed that the Government’s manifesto commitments gave it limited room for manoeuvre, but added: “As with any tax increase, there is the question of what it would do to demand and activity in the economy – and that will depend on how quickly you were going to do it and where the end point is.”
Simon Wren-Lewis, a professor of economics at Oxford University, said: “You can kind of talk yourself into an inbuilt pessimism here. If you are all the time talking about ‘we’re going to have to do lots of tough things in the future’, then people are going to hold back on spending, investors are going to hold back on investment, because they think the demand will go away and you get into this kind of pessimistic circle whereby the economy doesn’t recover very strongly because everybody is anticipating this fiscal retrenchment.”