With the Chancellor delivering the budget on March 21st 2012, he has been put under pressure by all sides of Westminster and the IFS to make tax cuts.
The IFS have suggested that National Insurance or VAT could be cut by up to £20 billion, by George Osborne, as the economy looks set to deteriorate ahead of a feared Eurozone break-up.
However, despite calling for emergency tax cuts, the IFS have admitted that such a move would only deliver a small boost, and any bigger packages proposed by the Chancellor could potentially undermine investor confidence and do further harm.
An economist at the IFS has said that any proposal for tax cuts need to be timely, temporary and targeted, suggesting that a “temporary cut to VAT has the largest immediate impact.”
It’s reported that, if the rate of VAT was reduced from 20 percent back to 17.5 percent, it would cost around £12 billion a year; whilst a temporary cut to National Insurance contributions for employers would cost around £4.5 billion per year, if reduced by one percent.
Despite the pressure from Westminster and the IFS, the Treasury has said that a tax cut was not affordable.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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