As the Chancellor delivered the 2012 UK Budget today, he referenced Adam Smith's progressive system of taxation. However, despite modest signs of growth in the UK economy, there is very little in the purse for additional measures to assist business.
At this point, Mr. Smith's "invisible hands" of fiscal policy are tied. Instead, attention is being focused on a few notable announcements.
- Commitment to a UK corporation tax rate reduction of 24 per cent from 2012 and a 22 per cent rate by 2014
- Continued support and consultation for a General Anti-Avoidance Rule (GAAR) to be introduced in 2013
- Announcement of a reduction in the top 50 per cent rate of income tax to 45 per cent starting April 2013
- The introduction of a "Mansion" tax (by increasing stamp duty on purchases of homes worth in excess of £2 million to 7 per cent)
- Closure of stamp duty avoidance schemes - with the introduction of a 15 per cent rate of stamp duty for residential properties acquired and transferred by companies
The changes to the 50 per cent tax rate are welcome and may dampen the negative impact on entrepreneurs and investment in the UK and, fortunately, the Chancellor has resisted calls for a punitively named "Tycoon Tax."
The commitment to a lower corporation tax rate is a welcome change and we are already seeing a marked change in how the UK is viewed as a potential location for multinational operations. However, the onerous GAAR will destabilise this and may be detrimental to the UK's position as an attractive fiscal location to do business.
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A&M Taxand UK 2012 Budget (PDF)
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