2012-05-18T20:39:25ZBerg Kaprow LewisCopyright 2012, Berg Kaprow LewisSPHPBLOGCalls to End Quantitative Easing Premature The Bank of England, who restarted its quantitative easing asset purchases last October, decided earlier this month to halt the scheme having purchased a total of £325 billion in UK government bonds.
Mr Posen said, in an interview which has been published by newswire MNSI, that he felt the latest round of quantitative easing had had less of an impact than the initial £200 billion programme, which was why he dropped his call for additional stimulus.
However, he went on to say that he may have underestimated the weakness of Britain's economy, which fell back into recession in the first three months of this year.
He said: “I had been hopeful in the last few months that after we did an additional £125 billion quantitative easing that was getting close to enough. And now I am debating whether I was premature to think that.
“I personally have had to downgrade my estimate of the bang-per-pound of this last round of QE from what I thought it was going to be and that is one of the major components why I'm less optimistic now than when I started to vote for no change in policy.”
Mr Posen, added that his previous belief that the UK economy may be healthier than official data suggest "may have to be discounted somewhat," citing poor construction output and gloomier business surveys.
]]>http://www.bkl.co.uk/blog/index.php?entry=entry120518-1250162012-05-18T00:00:00Z2012-05-18T00:00:00ZHMRC Tax Chiefs to Leave The departures are said to come at the same times as a reshuffle of HMRC’s management following the announcements earlier this year that the chairman of HMRC’s ten-strong board, Mike Clasper, is set to stand down later this year; and that the director of customer and strategy, Naomi Ferguson, is leaving in July to take up a position as chief executive and commissioner of the New Zealand tax authority.
It has also been suggested that the departures come amid concerns about the fitness of its commissioners, with three of the four leaving, being accountable to parliament for collecting taxes in the name of the Crown.
Those three civil servants are planning to retire, with HMRC saying the retirements were planned as the individuals were at or past the retirement age of 60.
The fourth top tax chief, who is to leave HMRC, is Steve Lamey, who is the director-general for benefits and credit and is said to be leaving to work in the private sector.
Speaking following the news of the departures, Chas Roy-Chowdhury from the Association of Chartered Certified Accountants, has questioned how HMRC will cope with the departures, saying: “It will be terribly sad to see these people go at once.
“How are they going to deal with such a great loss of intellectual property and collective memory?”
]]>http://www.bkl.co.uk/blog/index.php?entry=entry120517-0936442012-05-17T00:00:00Z2012-05-17T00:00:00ZNew Bank Rules Agreed The agreement, which was reached in Brussels yesterday (May 15th 2012) is seen as a victory for George Osborne, as it will allow the Chancellor to implement stricter rules and key policies recommended by the Independent Commission on Banking (ICB) last year, including retail ring-fencing and a ten percent capital buffer, designed to prevent the UK from future financial difficulties.
Under the new agreement, all European Union banks will be required to hold more “top quality capital” broadly meeting new international standards; with the agreement moving the European Union a step closer to being the world’s first large jurisdiction to implement the so-called Basel III capital rules; an internationally agreed blueprint for avoiding another banking crisis.
Michel Barnier, the EU’s financial services commissioner, said of the new rules: “Our overall objective remains to strengthen the resilience of the banking sector in the EU while ensuring that banks continue to finance economic activity and growth.
“The final compromise must contribute to financial stability, the necessary basis for growth and employment.”
Following the agreement yesterday, the new rules are now set to go before the European Parliament, and it is widely expected that the new regulations will come into force in June.
]]>http://www.bkl.co.uk/blog/index.php?entry=entry120516-1005272012-05-16T00:00:00Z2012-05-16T00:00:00ZFuel Duty to Rise as Treasury Faces Tax Shortfall The RAC Foundation commissioned report has claimed that the gap in public finances will be caused by the increased use of more fuel-efficient vehicles, which is expected to see fuel duty collected by the Exchequer fall from its current levels of 1.7 percent of GDP to 1.1 percent of GDP by 2029.
During the same period, vehicle exercise duty (VED) is also expected to fall from 0.4 percent of GDP to 0.1 percent of GDP, which will lead to a £13 billion shortfall in motoring tax revenue.
RAC Foundation director, Professor Stephen Glaister, said: “If the Chancellor was faced with a £13 billion shortfall in motoring tax revenue today, he would need to push the rate of fuel duty up from fifty eight pence per litre to eighty seven pence per litre to fill the financial black hole.
“The irony is that while ministers encourage us to buy greener, leaner cars, they are being forced to look at ways of clawing back the money motorists think they will be saving. This isn't scaremongering.
“The Treasury has already announced a review of VED bands to ensure drivers make a fair contribution to the public finances even as cars become more fuel-efficient.”
The lost revenue the Treasury faces is said to be the equivalent to increasing the basic rate of income tax from twenty pence to twenty three point four pence, VAT from twenty percent to twenty two point seven percent; or raising fuel duty by more than fifty percent.
]]>http://www.bkl.co.uk/blog/index.php?entry=entry120515-0927232012-05-15T00:00:00Z2012-05-15T00:00:00ZInterest Rates to Stay At Record Low Until Next Year Last week, the bank signalled that interest rates would remain at 0.5 percent, as the central bank once again uses its quarterly inflation report to cut its forecast for the UK's economic activity and brace for higher-than-expected inflation.
Economists are now expecting the Bank of England’s report, which is due out later this week, to signal that the cut to the interest rates current low – which was made in March 2009 – will remain on hold for many months more, despite inflation being above its official two percent target.
One economist has said: “It is odds-on that the new forecasts contained in the report will be the all too familiar and dispiriting mix of reduced growth but higher inflation expectations.
“We expect it to indicate that interest rates are unlikely to rise from the current level of 0.5 percent until at least late-2013, and very possibly not until 2014.”
Along with expecting the record low level of inflation to stay until late next year, economists also believe that the report will leave the door open for the Bank of England to announce further quantitative easing, either explicitly or by forecasting that inflation will probably fall below the two percent target within two to three years without a change in policy.
]]>http://www.bkl.co.uk/blog/index.php?entry=entry120514-0856042012-05-14T00:00:00Z2012-05-14T00:00:00ZUK Companies Strike Tax Deal With Luxembourg Confidential tax agreements obtained by the programme detail plans to move profits off-shore to avoid what was, at the time, a twenty-eight percent corporate tax rate; with the businesses telling Panorama they have a duty to be tax efficient.
According to the confidential tax agreements one company, with UK headquarters set up a new company in the tiny tax haven of Luxembourg four years ago. A year later, the subsidiary lent the UK based company £6.3 billion, and in return the UK company paid £124 million in interest back to the subsidiary.
By paying the £124 million in interest, it effectively removed the money from the UK company’s profits, which in turn meant that the money was no longer available to be taxed at twenty-eight percent in the UK.
Meanwhile, the tax authorities in Luxembourg had agreed a deal to levy tax on the £124 million, at effectively less than 0.5 percent, resulting in the firm potentially avoiding up to £34 million in UK corporate tax.
A former investigator with HMRC, Richard Brook, said of the deals: “The company puts its money into Luxembourg and borrows it back. It just sends money round in a circle and picks up a tax break on the way.”
]]>http://www.bkl.co.uk/blog/index.php?entry=entry120511-0859502012-05-11T00:00:00Z2012-05-11T00:00:00ZHMRC Under Fire Tests, such as the twelve business entity test, which promised by HMRC in the aftermath of the 2011 Budget when the Treasury committed to “making clear improvements in the way IR35 is administered”, have been pushed into the spotlight in recent weeks, after a crackdown was launched on tax avoidance, following the chief executive to the Treasury, Danny Alexander uncovering 2,000 cases of tax avoidance across Whitehall.
HMRC’s tests aim to help contractors predict whether their companies will be at a high risk of being caught by the IR35 anti-avoidance rules.
However, it has come under heavy criticism, with trade bodies arguing that the scoring used within the tests is unfair and will push too many businesses into the high risk group.
Martin Hesketh of the FCSA added the system “will push a disproportionate number of businesses into the high-risk category, and in so doing will prevent genuinely high-risk cases from being identified.”
Chairman of the Professional Contractors Group, Chris Bryce, claims the approach taken by HMRC was too risk averse, adding “HMRC’s new guidance demonstrates their fundamental lack of courage and commitment to improve the operation of IR35.”
Despite the criticism from trade bodies, HMRC are committed to tackling tax avoidance and have said that the initiative would be piloted over the next year and might later be updated in response to feedback
]]>http://www.bkl.co.uk/blog/index.php?entry=entry120510-0943242012-05-10T00:00:00Z2012-05-10T00:00:00ZCharity Tax to Cost Over £1 Billion The latest research findings have been released as leading members of the charitable sector met the Treasury minister, David Gauke, and the Civil Society minister, Nick Hurd, to discuss the cap and its effects on large charities.
The research by Oxford Economics looked at the "multiplier" effects of donations to the charitable sector on the wider UK economy; and the findings suggest that the loss of £500 million-a-year real-terms cut in charity incomes would cost between £1.2 billion and £1.5 billion in lost benefits to society.
Charities Aid Foundation’s chief executive has claimed that the cost of the move to cap charity donations was disproportionate to the additional revenue the Treasury would receive; adding: “The reality is that this tax change will yield relatively small amounts for the Treasury but threaten large cuts in charities, which are already hard pressed in the current economic climate.”
The Treasury have signalled, ahead of the meetings with members of the charitable sector there was “some flexibility” and was now in discussion with the charitable sector to find a solution, with one suggestion being that the cap could be lifted from twenty five percent to fifty percent for donations to charity, and that donors could roll over unused reliefs from one year to the next.
]]>http://www.bkl.co.uk/blog/index.php?entry=entry120509-1001332012-05-09T00:00:00Z2012-05-09T00:00:00ZIs the Bank of England Hurting Recovery with QE? It has been claimed by the economic consultancy firm that the level of UK growth witnessed could be a result of the lack of competitive pressure between companies to supply goods and services, rather than a lack of demand from customers.
The economic consultancy firm have warned that the loose monetary policy of the Bank of England, combined with low interest rates and quantitative easing could have added to the economic problems by fuelling inflation.
A spokesperson for the consultancy firm, said: “The UK is suffering from a combination of anaemic growth and excessive price inflation. It is displaying all the classic hallmarks of a negative supply shock. If so, the current stance of monetary policy is set to the wrong dial.
“The right response to a negative supply shock is a modest tightening of real interest rates.”
The warning from the economic consultancy firm, comes days ahead of the Bank of England’s expected announcement that quantitative easing has been halted at £325 billion.
]]>http://www.bkl.co.uk/blog/index.php?entry=entry120508-0859252012-05-08T00:00:00Z2012-05-08T00:00:00ZTop Rate Tax Should be Forty Eight Percent Lord O’Donnell, who stepped down as Cabinet Secretary last year, suggested that the government’s Budget decision to cut the rate from fifty percent to forty-five percent may have gone too fair, if the aim was to raise the maximum amount from the reach.
He added that figures from the Office for Budget Responsibility show that a forty-eight percent tax would be “revenue maximising”, saying: “What struck me was the solution to one of the all times biggest problems that economists have faced, which is what os the income tax rate which maximises revenue?
“Nobody’s mentioned it really; it is there in a footnote, forty-eight percent, that is what is there in the Office for Budget Responsibility’s report.”
The Office for Budget Responsibility described the Treasury costings for the change as “reasonable and central”, adding that the government’s assumptions about the costing “implies that the revenue-maximising additional tax rate is around forty-eight percent.
“Moving from just above to just below this rate would therefore have very little revenue impact.
“Moving the additional rate back to forty percent would take it further below the revenue maximising rate and would thus be more expensive."
The higher rate tax was first introduced at fifty pence in the pound for earning above £150,000 in 2010 by Labour. However, since coming into power the Coalition Government have been under pressure to bring the rate back down in line with the former forty-percent; although in the March Budget, they announced it would bring it down to forty-five pence.
