Will taxes go up because of coronavirus?

Linda J. Dodson

The Chancellor will have no choice but to raise taxes in the autumn to cover the huge amount of state aid spending for families and businesses struggling during the coronavirus outbreak, experts have said. 

Rishi Sunak could be forced to break Conservative manifesto pledges not to increase rates on income tax, National Insurance and VAT to balance the books and make up for lost revenue. 

Tax advisers are also warning of a strong-handed crackdown on tax evasion and avoidance, with HM Revenue & Customs handed additional powers to close the tax gap, which currently costs the Government around £30bn a year in lost duties. 

The state is expected to spend more than £1 trillion for the first time ever this year, as it funds the NHS and attempts to save business and workers from financial ruin, taking public expenditure to more than half the national income. 

More than a million more people are expected to be out of a job over the coming months, with one in ten workers becoming unemployed, according to the independent Budget for Office Responsibility. It says the economy could shrink by as much as 13pc over the year. If the economy does not bounce back quickly, the economic picture will be even worse. 

It will mean far less money being paid into the Treasury’s coffers, as business profits suffer and the tax haul from incomes and company profits, as well as National Insurance duties and other levies, shrinks. 

The Chancellor has already hinted strongly at increasing the amount of National Insurance contributions self-employed people have to pay. 

Currently, a self-employed individual pays three percentage points less in National Insurance contributions on profits up to £50,000 compared to employees. Previous attempts to increase the tax fell apart following fierce criticism from the freelance sector, but Mr Sunak has said everyone must pay the same in future if they wanted to benefit from state support.

Boris Johnson promised to cut the rate of corporation tax for businesses from 19pc to just 17pc in the run up to the December general election, but the policy was quietly scrapped. 

Source Article

Next Post

Coronavirus latest: Tokyo confirms 200 cases, Taiwan zero again

The Nikkei Asian Review is tracking the spread of the new coronavirus that originated in the central Chinese city of Wuhan. Global cases have reached 1,995,983, according to the World Health Organization. The worldwide death toll has hit 131,037. To see how the disease has spread, click this interactive virus […]

You May Like