NEW DELHI, JUNE 23, 2010: UK's emergency budget has
hiked value added tax, introduced a levy on foreign banks, restricted tax
reliefs, raised capital gains tax, and even frozen payments to the monarchy to
lower budget deficits and get the country out of its worst post-war
recession.
Reversing the previous government’s policy, the coalition government’s
Chancellor of the Exchequer Mr George Osborne presented the budget in Parliament
on Tuesday and announced a host of measures to reduce budget deficit, forecast
at 10 per cent of the GDP, to ensure economic recovery through spending cuts
rather than tax increases.
To
raise the much needed funds, the government declared its decision for sale of
rights to operate the country’s only high speed railway as well as dispose its
shareholding in favour of private ownership in the government-owned national air
traffic control services (NATS).
Even
the monarchy was roped into the austerity measures whereby the government froze
the annual payment of £7.9million made to the royal family and introduced an
audit scrutiny on government expenditure on the monarchy.
Some
of the highlights of the budget are as follows:
1.
VAT: The standard rate of VAT increased form 17.5 per cent to
20 per cent from January 2011.
2. Capital Gains: Tax on capital gains increased from
18 per cent to 28 per cent for hgiher rate taxpayers.
3.
Direct Tax: Rationalisation of the tax structure whereby the
point at which people start paying tax would rise by £1000 next year.
Adjustments would ensure that the majority of higher rate taxpayers would pay
the same total level of income tax. The basic rate limit for tax would be
reduced by £2,500.
4.
Insurance Premium Tax: The standard rate of insurance premium
tax, which applies to most general insurance premiums would be increased from 5
per cent to 6 per cent from January 2011.
5. Bank Levy: A levy on the balance sheets of banks is
expected to yield £2 billion, to be announced next year.
The
government also announced it commitment to tackle tax avoidance.
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