UK Chancellor Rishi Sunak’s Proposals For Sweeping Tax Hikes To Fund Covid-19 Stimulus Faces Resistance From Party MPs
UK chancellor Rishi Sunak has been cautioned against a proposal to unveil sweeping set of tax increases to help address the gaping hole in the public finances left by the coronavirus pandemic, The Financial Times reported.
In March, Sunak had unveiled an unprecedented stimulus plan to confront the economic fallout from coronavirus pandemic. The government announced several measures including job retention scheme, tax cuts for businesses and consumers and even a dining-out subsidy to coax people back into restaurants. . Britain's public debt has passed 2 trillion pounds ($2.7 trillion) as a result of the emergency spending
The Sunday Times reported that Sunak was considering a proposal to boost the corporation tax rate to 24% from 19% to raise 12 billion pounds next year, rising to 17 billion in 2023-24. The other tax proposals include cutting incentives for private pension contributions and increasing capital gains tax rates.
In U.K, capital gains tax ( the tax on sale of property, shares, personal possessions and business assets above £6000) is charged on gains exceeding an annual allowance, which is currently pegged at £12,300.
In July, Sunak had ordered a review of capital gain tax in July. A proposal to raise capital gains tax to the same rate as income tax, which will raise some 14 billion pounds for the Treasury, is reportedly under consideration. This would mean second homeowners and those who own buy-to-let properties would pay capital gains tax at 40 percent instead of the current 28 percent.
The Telegraph reported that Treasury officials were considering an end to a freeze on fuel duty and a tax for online retailers.
Several Tory MPs expressed displeasure at the proposals.
The UK economy has suffered its worst economic contraction on record as coronavirus lockdown measures pushed the country officially into recession, BBC reported.
On Aug 11, Office for National Statistics (ONS) said that the country’s gross domestic product (GDP) fell in the second quarter by 20.4% compared with the previous three months – the biggest quarterly decline since comparable records began in 1955.The decline is equivalent to an annualized rate of 59.8%.
Over the comparable period, the U.S. and Germany lost around 10% of their output, with Italy losing 12%, France 14% and Spain 19%. UK has suffered the sharpest economic slump compared to any other major European economy. It is likely to be worst hit economy among the G7 nations
The ONS said the collapse in output was driven by the closure of shops, hotels, restaurants, schools and car repair shops.
Services, the biggest driver of the economy, shrank 20% while industrial production plunged 17%. Government spending fell 14%, while business investment plunged 31.4%, and consumer spending declined 23.1%.
Acknowledging the dismal economic data, Rishi Sunak, the chancellor, said: “I’ve said before that hard times were ahead and today’s figures confirm that hard times are here. Hundreds of thousands of people have already lost their jobs and, sadly, in the coming months many more will. But while there are difficult choices to be made ahead, we will get through this and I can assure people that nobody will be left without hope or opportunity.”
The economic collapse renewed calls from businesses to extend wage support through furlough scheme and also respond with other fiscal measures.
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