George Osborne: Tax dodgers will be hit ‘like a ton of bricks’
GEORGE Osborne has vowed to “come down like a ton of bricks” on rich tax avoiders, as insiders revealed he will announce a new law to bring in billions of pounds for the Treasury in his Budget this week.
The Chancellor made the pledge following revelations that wealthy celebrities have used offshore companies to avoid paying stamp duty on homes in the UK – costing the Exchequer an estimated £1 billion a year.
Amid criticism of his plans to scrap the 50p tax rate on earnings above £150,000, Mr Osborne said the bulk of his Budget on Wednesday would help low and middle income earners.
Treasury sources told The Scotsman the Chancellor will announce that a bill will be introduced to parliament in 2013 to close down tax loopholes.
The bill is expected to target schemes such as offshore companies created to avoid stamp duty, in addition to a range of other tax avoidance measure that could see “non-doms” pursued. Treasury sources said they wanted to ensure that the wealthy could not avoid paying tax simply “because they can afford clever accountants”.
Mr Osborne said: “The bulk of the measures in the Budget are going to be targeted at working people on low and middle incomes. That is our priority.
“We want to be in the front rank of economic powers and we are prepared to confront our problems to create jobs, growth and prosperity and a brighter future for the next generation.”
The Chancellor said he would “come down like a ton of bricks” on wealthy people who sold properties through offshore companies to avoid paying stamp duty. He said: “We are going to be extremely aggressive in dealing with it and people are going to face a very punitive charge.”
The Budget was already being dubbed by some in the coalition “the Robin Hood Budget”, aimed at taking money from the wealthy in the City and “putting it on the kitchen tables of hard-working families”.
The move is being hailed by the coalition’s junior partners, the Liberal Democrats, as a major victory in their Budget negotiations, which has also won them an expected acceleration in raising the threshold at which income tax is paid to £10,000 over two years.
The two key economic policies in their 2010 manifesto were to bring the threshold to £10,000 and to close a range of tax avoidance schemes and loopholes to bring in revenue estimated by the party at up to £12bn.
There was also speculation last night that the Lib Dems’ third key policy, the creation of a mansion tax, would also be included, although may only apply to properties worth £5 million or more rather than the Lib Dems’ call for it to apply at £2m or more.
Discussions on the Budget have centred around talks among the “Quad” – Mr Osborne and Prime Minister David Cameron for the Conservatives, and Lib Dem Deputy Prime Minister Nick Clegg and Treasury Secretary Danny Alexander for the Lib Dems.
Last night, the Lib Dems were privately claiming to have won major concessions for their agreement to scrap the 50p tax rate. A senior Lib Dem source said: “This Budget needs to show how the Liberal Democrats are anchoring this government in the centre ground. It must be a Budget for the many, not the few.
“It’s all about making people pay their fair share and putting money back in the pockets of ordinary working people. We want to help millions, not millionaires. This should take money from the trading floor and put it on the kitchen table.”
The source added: “Nick [Clegg] staked out a strategic position at the beginning of the process by setting out his negotiating priorities in a clear and unambiguous way.
“We’ve set ourselves three key tests for this Budget. If we meet them all, then Nick and Danny [Alexander] will have delivered a Budget we can be extremely proud of.”
The key tests are raising the threshold, hitting tax avoidance and tackling the national debt.
But there were signs that the measures will receive support from right-wing Tories, who have been fighting for the 50p rate to be scrapped because they fear it is encouraging the wealthy to leave the UK, particularly the City of London.
Conservative MP John Redwood, a former Cabinet minister, argued that abolishing the 50p rate would boost the economy and actually produce more revenue for the Treasury.
He said: “I want the rich to pay more. And I think the obvious way to get them to pay more is to set them a rate which will make them stay and pay.
“I think the 50 per cent tax rate is losing us money and I think we all agree we want the rich to make a bigger contribution.”
But Mr Redwood also set out demands from the Tory backbenches for pension relief.
He said: “I think it’s a good thing that people save and that they will make provision for their own retirement and not need state benefits when they retire. So I really wouldn’t fiddle around with it.”
Meanwhile, CBI director general John Cridland said Mr Osborne should indulge in only “modest, targeted tax cuts”.
He said: “I don’t think the country can afford significant tax cuts if it really wants growth. Those targeted measures are about investment in infrastructure and in small businesses. I don’t think this is the Budget to be talking about big giveaways. That’s why we came in with a very hair-shirt Budget proposal.”
Shadow chancellor Ed Balls attacked the plans to cut the 50p rate and repeated his calls for a bank bonus tax and cut in VAT.
He said: “For families on middle and low incomes seeing their petrol prices up, their fuel bills up, the living standards squeezed, youth unemployment rising, the idea that George Osborne is saying the number one priority is to cut taxes on salaries of £150,000 – they can’t be serious. What planet are they on? The nation needs a plan for jobs and growth. Instead, they are playing politics with the national interest.”
In a keynote speech today, Mr Cameron is expected to announce that there will be money for new infrastructure to allow Britain to be more competitive.
While the money will mainly affect only England and Wales, Barnett consequentials – calculations to give public spending parity in UK regions – should allow the Scottish Government to pay for some “shovel-ready projects” it has said can boost the Scottish economy.
Mr Cameron is expected to say: “The truth is, we are falling behind our competitors. And falling behind the great, world-beating, pioneering tradition set by those who came before us.
“There is an urgent need to repair the decades-long degradation of our national infrastructure and to build for the future with as much confidence and ambition as the Victorians did.”
Mr Osborne is due to meet Mr Cameron, Mr Clegg and Mr Alexander for Budget talks today.