On February 7th the Public Accounts Committee of the Parliament of the UK voiced criticism at the lack of communication between the Treasury and the HM Revenue and Customs (HMRC), pointing to new evidence of inadequate data sharing amongst government departments.

The Committee’s concerns are based on new data from a recently published report, the Whole of the Government Account for 2009 – 2010, which contains the first ever compiled analysis of all government accounts.

One of the main concerns, among others, of the Committee was the fact that the Treasury was not aware of the decision of the HMRC to write off almost GBP 10.9 billion of unpaid taxes.

The PAC also claimed that there is evidence to suggest that the Treasury has no clear indication of how much the HMRC expects to collect from the total amount of unpaid taxes, which currently stands at GBP 15.7 billion.

Commenting on the report Margaret Hodge , Chair of the Committee of Public Accounts, said that “This is the first time either Treasury officials, or ministers, or MPs and the public have been able to look at the total cost of policies over time. The challenge is to improve the accuracy and extend the coverage so that there is proper transparency over the Government’s spending commitments over time… Government must then use the information to make better decisions and we will be able to judge them more effectively on value for money.”

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The UK government needs to “…end the privileged status that the financial services sector enjoys at the expense of everyone else by announcing [a] tax on excessive pay and bonuses”: such a conclusion was drawn by the Trade Union Congress (TUC) in a new report published recently.

According to the TUC, there are 81 000 taxpayers in the UK who have personal incomes exceeding 10 times more than the national earning average, and are paid a culmulative amount of GPB 6.8 billion per year. The report found that a majority of these taxpayers earned their incomes from salaries and bonus payments, but not from an investment or from capital earnings.

The TUC proposed that the government should change the current tax rules so that all payments of salaries and bonus exceeding an annual amount of GBP 262 000 a person should no longer be treated as non taxable expenses for the purpose of calculating corporate taxation. If implemented, the new measure would enable the UK government to raise an extra GBP 5 billion in tax revenues per year. The TUC claims that the change would also encourage large corporations to increase salaries to lower level staff.

Photo by tuc.org.uk

According to the report published on January 30 by UK Taxpayers’ Alliance, the members of an average UK family will pay more than GBP 656 000 in direct and indirect taxes over their lifetime, with over GBP 250 000 payments for income taxes, and an extra GBP 101 000 in Value Added Tax payments. Council tax and national insurance contributions were the next biggest liabilities faced by taxpayers.

The highest earning families in the UK will face cumulative tax liabilities of approximately GBP 1.3 million, while the families with the lowest earnings will see total obligations of GBP 235 000.

The results of the research are based on currently applicable rates of taxes and other fiscal contributions in the UK, and are calculated for an “average” family having a gross annual income of GBP 36,372, with a working lifespan of 40 years and an additional period of 15 years of retirement.

Commenting on findings, the director of the Taxpayers’ Alliance Matthew Sinclair, said that “…households in the UK now pay an incredible amount in tax over a lifetime, handing over a hefty slice of their income” and suggested that “… Chancellor needs to deliver a tax cut in the Budget, to ease the burden and help the economy to grow”.

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In a television interview with the BBC held on January 9th the Prime Minister of the UK David Cameron said that the country’s top marginal tax rate, which is currently set at 50 percent, is still regarded as a “temporary measure”, but indicated that it would not be removed in the next few years.

David Cameron said that he does not want to see the UK maintain such a high marginal tax rate, but the measure were necessary at the present economic situation. Before the government could scrap the tax, evidence will need to show that the tax is damaging the economy.

The HM Revenue and Customs is currently preparing a report on the effectiveness of the 50 percent top marginal tax rate since its implementation in 2010. Some experts have indicated that the report is likely to show that the tax has proven to be a powerful revenue raising tool, and should not be removed any time soon.

The Prime Minister’s words come in response to an article published by The Daily Telegraph, which claimed that the government would not be removing the top marginal tax rate before 2015. The article also suggested that cutting the tax would be a politically difficult move for the Prime Minister, as it will lead to allegations that the government is catering to the richest people in society.

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In 2011 foreign residents purchased GBP 4.3 billion worth of real estate in the city of London, and the current tax rules in the UK meant that the properties were levied at a reduced tax rate, costing the HM Revenue and Customs over GBP 750 million in lost tax revenues. Under current regulations, properties worth over GBP 1 million which are purchased by a foreign company are only subject to a 0.5 percent stamp duty, compared to the regular stamp duty rate of 5 percent.

According to experts, more than 65 percent of all properties available in London in 2011 were purchased by overseas residents, who were mainly from the Middle East or countries of the former Soviet Union. London’s popularity as an investment destination has been attributed to the simplicity of the UK’s regulations for purchasing property, and the current rules which allow real estate to be held anonymously by companies registered in offshore jurisdictions.

According to estimates published by the British press, nearly 9000 new homes and apartments are being built over the next 9 years in order to meet the current demand for new property investments.

Photo by failing_angel