| There are two stories that have got everyone talking today. The first is a think-tank's idea of an exit tax to ensure the peripatetic wealthy can't leave the UK so easily, or cheaply, in future; the other is the revelation that two of Rachel Reeves's totemic tax changes are having to be reviewed after internal analysis revealed they would cost more than they would bring in to the Treasury. The exit tax is being touted by a group of economists as a quick fix for the government to ensure the wealthy can't relocate from the UK too easily. It's done in the US and many European nations and is an idea to ensure that rich emigrés settle their capital gains tax bill on the way out the door. Right now when they leave, as our reporter Philip Aldrick explains, as many as three-quarters of departing entrepreneurs and investors redomicile in tax havens where they end up paying no dues at all on their UK assets. Obviously, if you are a government trying to shake the tree for extra billions, this proposal could be a better way to raise cash than some of the other changes to capital gains tax being floated. As Philip points out, the UK and Italy are the only countries in the G-7 that don't have this kind of exit tax. His piece might feature a brace of serious voices, but I am not sure the time is right. Just next week the government is set to welcome businesses to its global investment summit, an attempt to unleash the wall of private money that it boasted was there to be tapped before the election. Unveiling a new exit tax is unlikely to strike the right tone — that wall of money might stay firmly bricked up — even though the practice may be quite widespread across advanced nations.  Rachel Reeves meets workers at a glass factory in Chester last week Photographer: Anthony Devlin/Bloomberg Let's see. As it is, Reeves's first fiscal event is becoming more complicated by the day. Bloomberg's Joe Mayes reports today that her team are walking back on the proposals on both non-doms and private equity. We are learning a bit more about her as chancellor: she is apparently choosing a pragmatic response after learning a political gambit isn't going to work. When the facts change, she changes her mind. Pragmatic, but is she painted into a corner? Her proposed tax changes won't deliver anywhere near as much revenue as Labour hoped for before the election. If attendees at the investment summit remain worried about taxes, exit or otherwise, they'll be pleased by the new Regulatory Innovation Office that Ellen Milligan and Mark Bergen reveal the government is setting up to allow rapid approvals of new technologies. It sounds positive, but some worry about the word "regulation" in the title, as they think the UK needs to take risks rather than regulate its way to success. There's something else that will be watched in Number 11 — the yield on 10-year gilts is rising at quite a rate. This story says our borrowing costs now outweigh Germany's by the most in more than a year. While it's complicated with some widening due to factors in the German economy, it also suggests markets may not be as relaxed about possible changes to fiscal rules that may be in her budget. Here's one analyst quoted by Bloomberg's James Hirai: "Investors fear the UK Labour government will fund increased investment with higher debt issuance rather than tax hikes." The trouble for Reeves is that it is precisely those possible changes that are creating some optimism among infrastructure investors and parliamentarians too, who are keen for her budget to offer a positive vision for the country. The first 100 days have been tricky – the next 100 could be, too. Want this in your inbox each weekday? You can sign up here. | 
No comments:
Post a Comment