Liz Truss is considering plans to slash personal taxes in addition to business levies in new “investment zones” as she seeks to set the wheels of her economic strategy in motion.
Those who live and work in the low-tax areas envisaged by the prime minister could see their own contributions cut, with the burden also lightened for firms – although no decisions have yet been made, it is understood.
The proposed “investment zones”, dubbed “full fat freeports”, were a staple of Ms Truss’s campaign for the Tory leadership (Truss said it was an example of how she’d be “laser focused on turbocharging business investment” and that the zones would deliver the “growth our country desperately needs.”)
Under her plan, she said these areas would benefit from a low-tax burden, reduced planning restrictions and regulations tailored on a case-by-case basis.
The Sun on Sunday reported that the new PM is now weighing up whether personal taxes could be cut for people working there.
So, how are differential personal tax areas in differential business tax zones which avoid UK planning laws, thereby attracting and making the rich richer, going to help the rest of us …
What I don’t understand, and yes I am a bit thick, is how Brexit has allowed us to have Freeports.
The EU have had them for years.
I am not entirely convinced that the ability to invest my somewhat limited savings in a special area of the UK would greatly help the economic growth of the UK.
The chancellor, Kwasi Kwarteng, is expected to announce the creation of a network of low-tax, low-regulation investment zones in an emergency budget on Friday.
Planning regulations will be relaxed in up to 12 places earmarked for this status, and taxes will be cut to incentivise investment.
The announcement, which is expected to take deregulation further than the post-Brexit freeports set up by Boris Johnson’s government, will be part of a package that will also see the rise in national insurance contributions abandoned, a planned increase in corporation tax scrapped and green levies temporarily removed from fuel bills.
Although not formally being billed as a budget, Kwarteng’s statement to MPs will dwarf most budgets in terms of its impact on the public finances. The main tax changes trailed in advance are expected to cost the exchequer at least £30bn a year.
Kwarteng wants to use the statement to show that the government is delivering quickly on the promises made by Liz Truss during her campaign for the Conservative leadership, when she said that investment zones would be at the heart of her plan to boost growth. A formal budget is due later.
The West Midlands, the Thames estuary, the Tees Valley, West Yorkshire and Norfolk are among the places where the zones may be sited. According to the plans set out by Truss in the summer, in each area there will be a central region, where regulations and planning rules will be eased to encourage industrial, commercial and residential development, and a periphery where the planning rules will be streamlined for housing.
So, KK wants the private sector to pump money into designated areas and generate economic growth …
Good luck with that, KK, the private sector is likely to use the tax breaks to generate more wealth for themselves and leave economic growth to fend for itself …
Freeports do attract businesses into their zones. However, most often they attract existing businesses. Businesses see the tax ducking opportunities and simply shift into the zones. This is not creating wealth, it is simply moving it about. Actually its worse, it is allowing some businesses and individuals to duck the tax contributions they should be making (and without creating new wealth). So everyone else has to pitch in to make up the shortfall in contributions from this lot ducking out. Or services need to get cut.
These ‘growth through freeports’ is just one more of Truss’ fairytale economics.
@strathmore , But surely businesses are allready ducking taxes by opening
offices in no tax places all around the world ??
Plus we allow large foreign corporations to operate here virtually tax free ?
So whatever we do will make no difference, as it seems inevitable that
rich people will always dodge paying their wack !!
We are all doomed !!
I think there are two different issues here. The one about world wide tax dodging is common and all the big companies take advantage of it, to a lesser or greater degree. But this is only open to businesses that are truly international. It costs money to shift your headquarters to Switzerland or Luxemburg so the payback needs to be big to cover that costs. And you need to demonstrate that there is justification to having your HQ there.
The concept of UK based freeports opens up tax reduction to purely UK businesses. A primarily UK business would not be able to demonstrate business rational for having a Swiss HQ. And there are tests and checks that tax authorities apply to validate a claim for tax exemption. Freeports make such checks simple - I’ve moved my warehouse into the freeports guv. All done.
But your last point that those with money can pay to avoid paying tax is very true. They can even pay to have lawyers challenge the law if the lawyers think there is a case. Us ordinary folk just get the net pay after our employers have already taken off tax. No opportunity for wangling out of tax like the rich do. I’ve never understood why so much more anger is expressed about someone defrauding the welfare system by a few thousand quid and so little anger expressed when millions are kept by not paying tax in a way that is only available to a very few.
@strathmore , lm with you all the way there, and you have cleared up why
we don’t move our offices closer to home too!
But l also believe our tax collectors in UK are, to put kindly,on the other
side so to speak ??
They don’t persue the heavy lifters??
Its a whole different world. HMRC has account managers (or equivalent) for large “clients” so that they can jointly work out the tax payable. Nice. A coffee, a chat, an opt out.
