NEWS – MONDAY 20TH JULY 2020
NEWS – MONDAY 20TH JULY 2020
TAX NEWS – MONDAY 20TH JULY 2020
PAC says Government unsure on tax relief value
The Public Accounts Committee (PAC) has warned that ministers do not know enough about tax reliefs, saying there is a lack of certainty over whether certain tax breaks work and provide value for money – as well as how much they cost. A report from the committee suggests the ten most expensive tax reliefs cost the public purse £117bn a year but “scant” evaluation by the Government shows that just one of the four tax breaks costing more than £1bn annually has the intended effect on economic behaviour. Meg Hillier, chairwoman of the committee, said: “Tax breaks are not freebies – they cost the public purse hundreds of billions of pounds in lost income. The Government must know who they benefit and to what end. It’s all still taxpayers’ money and government must account for it.” A Government spokesman insisted that HMRC “will provide information and extensive evaluation of the cost of tax reliefs to ensure they continue to work effectively.” They added that the tax office and Treasury “are constantly working to improve the transparency of reliefs and the National Audit Office has recognised the improvements in increasing oversight.”
The Scotsman, Page: 5 Financial Times, Page: 2 Yorkshire Post, Page: 8
Stride: Deficit puts tax vow under pressure
Treasury Committee chairman Mel Stride says a Conservative manifesto pledge to not raise income tax, national insurance or VAT could come under pressure as the country seeks to cover the cost of COVID-19, saying “pressures on tax will be potentially very considerable”, with the public appetite for broad spending cuts to reduce borrowing “limited”. Mr Stride believes tax “is going to be very central to the whole issue of fiscal consolidation and how we deal with the deficit.” Looking at the three taxes the Prime Minister has pledged will not rise, Mr Stride said they can “raise significant amounts of money”, telling the Telegraph: “They are three of the biggest ones you would turn to so it may be that there are going to be some very, very hard decisions around tax.” It is noted that the committee last week launched an inquiry into the tax system in the wake of the coronavirus.
The Daily Telegraph, Business, Page: 1
Tax system can help reduce the deficit
Roger Bootle, chairman of Capital Economics, looks at the measures that may be required to rebalance public finances that have been hit by the coronavirus. This comes after the Office for Budget Responsibility warned that the ratio of Government debt to GDP could exceed 400% by 2070 and said increased tax revenues and / or reduced spending are likely to be required. Mr Bootle says increasing tax revenue is “potentially dangerous”, arguing that there is little use in raising tax revenue in the short-term if doing so reduces long-term growth potential, adding that maximising growth “requires a tax system that is structured to strengthen incentives and boost efficiency”.
Tax rises ‘would be disastrous’
Michael Jacobs, a professorial fellow at the Sheffield Political Economy Research Institute, considers whether taxes need to rise or spending should be cut to pay the COVID-19 bill, saying that while ministers have been quick to deny a return to austerity is in the works, the Government has “been noticeably more reticent on tax rises.” Mr Jacobs considers an Office for Budget Responsibility report saying that in “almost any conceivable world”, a tax increase or spending cut will at some point be needed to boost public finances, arguing that in the medium to long term, taxes do need to rise, but in the short term, increases “would be disastrous” and withdraw demand from the economy just when it needs stimulating.
HMRC targets multinationals for £20bn taxes
Fitzgerald & Law research shows concern over profits moved to low-tax jurisdictions saw HMRC challenge UK multinationals over liabilities totalling £20bn in 2019, up from £12.7bn in 2015.
Tax rises will be needed to fill Britain’s fiscal hole
The FT suggests tax increases will be required to cover the costs of the coronavirus crisis, arguing that as well as increasing rates, the Chancellor should reform the system, simplifying some levies.
INDUSTRY NEWS – MONDAY 20TH JULY 2020
CFOs expect slow business recovery
A poll from Deloitte shows that CFOs do not expect businesses to see a quick bounce back from the coronavirus crisis, with many saying demand is unlikely to recover until the second half of 2021. The survey saw 49% of finance bosses say they do not expect demand at their firm to return to pre-pandemic levels until after Q2 2021, while 78% expect revenue at UK firms to dip over the next 12 months – down on the 97% who said the same in a Q1 poll. Some 80% of CFOs said there is a high or very high level of uncertainty facing their business, while 65% said they have been forced to reduce capital spending. Respondents ranked the effects of the pandemic as the greatest risk facing their business, followed by geopolitics, Brexit and economic weakness in the US. Deloitte chief executive Ian Stewart said major corporates are expecting “a long haul back” to pre-pandemic levels of revenue.
The Times, Page: 35 The Daily Telegraph, Business, Page: 6 The Guardian, Page: 28 City AM The Press and Journal, Page: 27
MPs demand crackdown on levy avoidance advisers
A cross-party committee of MPs has called for a change in law that would make it easier to prosecute tax lawyers, accountants and advisers who promote unlawful tax avoidance schemes.
CORPORATE NEWS – MONDAY 20TH JULY 2020
Dividends down 57% in Q2
Analysis by Link Group shows that dividend payments fell by a record 57% in Q2 as the coronavirus crisis prompted an unprecedented cut. Dividend payments fell to £16.1bn in the three months to the end of June, meaning investors missed out on £22bn. The second quarter saw 30 firms reducing their payout while 176 paid no dividends at all, with just 61 businesses increasing their dividend payout. Link Group predicts total dividend payouts for 2020 could fall to £56.7bn in the ‘worst-case scenario’, down from £110.5bn last year, while a best-case scenario would see £61.6bn handed out. It estimates that it could be 2026 before dividends return to their 2019 level, saying a lot of companies need to reset payouts to a “lower, more sustainable level from which they can again start to rebuild”.
Daily Mail The Guardian, Page: 28
Shift in business priorities
Research by BDO shows that business leaders’ priorities have changed in the wake of the COVID-19 outbreak, with reducing overheads and business costs the main focus, where six months ago the emphasis was on attracting and retaining high quality talent. More than nine in ten (92%) of respondents said reducing overheads would be important for their firm’s survival and success. BDO managing director Paul Eagland comments: “Unsurprisingly, some businesses have reined in their growth ambitions in order to focus on business resilience.” He added: “As we emerge more fully from lockdown, business leaders will need to continue to act with agility and creativity to ensure their businesses are in the best shape to take advantage of the recovery.”
Go Outdoors creditors may see a penny per pound
Deloitte has said unsecured creditors of Go Outdoors could recoup just 1p in every £1 owed. JD Sports, which bought the chain in a pre-pack administration, says it will pay HMRC, branded stock suppliers, customers’ returns and gift cards, with others – including landlords – set to be left out of pocket.
The Daily Telegraph, Business, Page: 3
EY warned Wirecard special audit risked misinterpretation
The FT reports that EY told Wirecard that a draft of the independent audit report by KPMG which flagged concern over the payments group’s accounts lacked context and risked misinterpretation.
SMEs NEWS – MONDAY 20TH JULY 2020
A fifth of SMEs eye smaller offices
Research by Santander shows that a number of SMEs are planning to downsize their offices and encourage staff to work from home in the wake of the COVID-19 pandemic, with 20% looking to occupy less space and 29% set to encourage remote working. The study, which surveyed 2,050 firms , saw 81% say they are concerned that their business will not recover from the impact of the crisis until 2021 at the earliest. Susan Davies, Santander’s business banking boss, said many SMEs have had to adapt “almost overnight” to survive.
Daily Mail, Page: 70
INTERNATIONAL NEWS – MONDAY 20TH JULY 2020
IBM warns US over digital tax retaliation
IBM has warned the Trump administration over potential retaliation against digital taxes, saying that if the US imposes tariffs on countries with policies designed to make internet companies pay more tax outside the US, it would damage the American economy. In a submission to a US investigation into digital services taxes being introduced in the UK, Italy, Spain, the EU and several other countries, IBM said: “Unilateral tariffs or other punitive trade or tax measures” would be likely to prompt “counter-retaliatory measures, negatively impacting multiple US sectors”.
The Daily Telegraph, Business, Page: 3
Greece uses tax to tempt pensioners
Greece is looking to tempt pensioners to move to the country with a flat rate of income tax at 7% for retired foreigners who transfer their tax residence. Discussing the beneficial tax rate for foreign pensioners, an incentive that would apply for ten years, Athina Kalyva, head of tax policy at the country’s finance ministry, said: “The logic is very simple: we want pensioners to relocate here.”
The Times, Page: 3
EMPLOYMENT NEWS – MONDAY 20TH JULY 2020
Recession to hit those in ‘left behind’ areas hardest
The Social Mobility Foundation says young people in social mobility “coldspots” identified by the Government’s Social Mobility Commission will be hardest hit by a recession brought about by the coronavirus pandemic due to their employment opportunities. The study found that young people in England’s 10 local authorities with the lowest social mobility are 32% more likely to be claiming out-of-work benefits than those in the 10 highest ranked. The North East and North West are the hardest hit regions, with more than 10% of young people claiming such benefits. The analysis highlights that a young person in Blackpool, the area with the highest rate of claimants, is seven times more likely to be in receipt of benefits than those in the area with the smallest proportion, Cambridge. Alan Milburn, the former Work and Pensions Secretary who chairs the Social Mobility Foundation, said: “Avoiding a jobs catastrophe for this generation of young people … requires urgent action by employers and government.”
The Independent, Page: 9
Pandemic pushes changes to working life forward
Writing in the Scotsman, KPMG’s James Kergon suggests that the COVID-19 crisis has “accelerated” disruption and change to traditional working practices. He says the crisis has given employers “a new perspective”, saying business leaders are already “examining how jobs are realigned to skills and task, rather than traditional job roles, and recognise how skills will be fluid and change to meet new roles that emerge or respond quickly to crisis.”
The Scotsman, Page: 35
Recruitment shifts to the kitchen table under new normal
Analysis by PwC shows that 26% of CFOs are concerned that remote working may result in reduced productivity, down from 63% at the start of the COVID-19 pandemic.
Contact Paul Southward