Raymond Doherty 12 Mar 2018 01:16pm

Spring Statement: plan post-Brexit tax system

The accountancy profession wants the chancellor to set out the UK’s long-term tax vision in the Spring Statement

Phillip Hammond is being urged to use tomorrow’s statement, which the Treasury has promised will contain no tax or spending changes, to consider the future of the tax system post-Brexit, and specifically how to tax the digital economy.

Last year Hammond scrapped the Autumn Statement – which was used by his predecessors as a second, mini Budget – for a Spring Statement to be used as an economic update.

Melissa Geiger, head of international tax at KPMG, says that the UK is at an “economic crossroads” as Brexit approaches and there is a “strong case to hit the pause button on any significant changes or unilateral action to taxing the digital economy.

“First, we need to fully understand how any solutions might affect the UK’s competitiveness. Conclusions must be drawn and change must happen, but only with a solution that operates for the benefit of the wider economy.”

Bill Dodwell, tax policy partner at Deloitte, said tax specialists would look out for any consultations from the Treasury. “The single Autumn Budget allows for more time to be given to medium-term tax policy development, rather than quick-fire changes. The UK needs to consider the future shape of the tax system, as technology and the digital economy develops,” said Dodwell.

Stella Amiss, head of tax policy at PwC, said that as the traditional sources of tax erode, the country needs an “open debate on the different tax scenarios once the UK has left the EU and the trade-offs they would involve.”

She predicts that there will be some developments in significant areas for tax in the form of a series of consultations as a number remain outstanding following the Autumn Budget.

“These could fundamentally impact future tax policy in a number of areas. The taxation of digital business and a further focus on off-payroll working could well continue to feature high on the agenda,” added Amiss.

Nilesh Shah, CEO of Blick Rothenberg agrees that government “needs to make some tough but quick decisions around Brexit and start focusing on what the economy needs for the new environment it finds itself in.”

While it won’t contain any new policy measures, the statement will include the latest official economic and fiscal forecasts.

The Institute for Fiscal Studies says it is likely to predict lower borrowing over the next five years than was forecast in November, but that shouldn’t be great cause for celebration. “The deficit will still be forecast to be much greater than thought just two years ago. Meeting the Government’s commitment to eliminate the deficit by the mid-2020s will remain extremely tough,” the think tank added.