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Budget View
“The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest amount of hissing.” Jean Baptiste Colbert
In practice, governments have always sought to find new ways to raise taxation. This is not just to minimise the pain we feel. To load the tax burden too heavily in too few places encourages us to look for ways to avoid paying it. Plato said “When there is an income tax, the just man will pay more and the unjust less on the same amount of income”.
Of course, tax policy also has a moral dimension. We traditionally used it to discourage alcohol and tobacco – always a reliable source of extra cash when the Chancellor is hard pressed. Nowadays, the green lobby holds sway and we tax fuel more and more, and find other ways to hit “gas guzzlers”.
Governments also recognise the moral dimension to saving. They purport to encourage saving, but tax breaks usually have limits. However, their commitment to saving needs to be taken with a pinch of salt – in the short term, saving rather than spending can stunt economic growth. The Government also has a vested interest in keeping people off income support in retirement – it will be targeting low earners with the “Savings Gateway” by matching their savings.
There are other ways to encourage the economy. Governments around the world compete to attract talent and encourage enterprise – hence all the kerfuffle about Non-Domiciles and Capital Gains Tax. In his laudable aim to simplify CGT, the Chancellor managed to upset lots of interest groups, including those, like MPFS, whose customers save through life assurance – in so called Insurance Bonds. He threatens to upset the level playing field between life assurance and direct investment in the stockmarket by favouring the latter.
Most of the good news for savers was announced a long time ago, but that did not stop the Chancellor from telling us yet again. ISAs are here to stay, and former PEPs will become ISAs – opening up new options for those who want to transfer. The subscription limit in the tax year 2008-09 will be £7200. This can all go into a Stocks and Shares ISA (like ours), or up to £3600 can go into a Cash ISA.
• For further information please call Metphone 28192, telephone 01689 891454 or visit
www.mpfs.org.uk
