Yesterday we heard that the Government wants to overhaul the Controlled Foreign Companies Tax (CFC). This is good news, as it may help stop businesses from moving overseas to more receptive economies. If firms move out of the UK then the Treasury will lose tax revenue, jobs would be lost and consumers would miss out on desireable products and services. Also announced was a 10 per cent Corporation Tax on new products developed in Britain, which will encourage innovation too.
One simple solution to create jobs and revive the economy may be to cut VAT. At least that is what Andy Cosslett believes. Cosslett, Chief Executive of the Intercontinental Hotels Group, said that “cutting VAT will create jobs”
After Christmas many consumers feel broke, but this year their pockets may be even emptier. VAT will rise from 17.5 per cent to 20 per cent in the New Year. This comes at a particularly bad time for consumers and businesses that may already have the post-Christmas blues.
We've blogged the fiscal Doomsday Machine many times (eg here). It's triggered when a government's debt interest payments grow so large that it starts to borrow increasing amounts simply to pay its interest bill. Just like with a credit card, such borrowing feeds on itself and can soon spiral out of control.
Yesterday's autumn fiscal report from the Office for Budget Responsibility gives us a clearer fix on how our own Doomsday Machine is looking. It gives us much more detail than any previous fiscal report published by the Treasury itself. And for that, the OBR deserves congratulation.