UK budget targets economic growth - Oman Daily Observer

NEWSLETTER - By Andy Jalil, Foreign Correspondent -
Focusing on economic growth has been a priority of the coalition and this has been reflected in Chancellor George Osborne's budget details. Businesses received a welcome cut to their tax bill as the Treasury accelerated its reduction in corporation tax for the second time in a year.
The chancellor cut the tax from 26 per cent to 24 per cent from April. It will cost the exchequer £3.76 billion, making it one of the most expensive tax cuts in the budget, but Osborne said his aim was to signal that Britain is "open for business."
He said: "The headline rate of corporation tax remains the most visible sign of how competitive our country is, (this is) the biggest sustained reduction in business tax rates for a generation.
Head of the Institute of Economic Affairs, Mark Littlewood said Osborne should be "commended" for the cut, saying it would encourage enterprise, stimulate growth and reward work."
In 2014 corporation tax will be 22 per cent, which Osborne emphasised is 18 per cent lower than in America and 8 per cent lower than in Germany.
He said he had put the UK "within sight" of 20 per cent rate eventually. It is felt in some quarters that the cut is still not enough. Director of Centre of Policy Studies, Tim Knox, who had called for a radical cut in corporation tax said: "Despite the bold rhetoric, the tax reforms are timid. They are moves in the right direction but little else and the tinkering is irksome."
Also feeling the cut is insufficient, Simon Walker, director-general of the Institute of Directors said: "We should be aiming for a corporation tax rate of 15 per cent by 2020 that would put Britain in a very strong position."
It must be borne in mind though that the revenue from corporation tax is only worth about 9 per cent of the total tax receipts and that is due to decline further with rate to be reduced to 22 per cent by 2014/15 at a cost of £1 billion in that year. Nevertheless it is a substantial reduction from 28 per cent rate the coalition inherited from the previous government.
Another area where the chancellor felt would give incentive to high earning investors was a reduction in the top rate income tax. The 50 pence in the pound that the previous government had introduced for those earning £150,000 per annum was reduced to 45 while he raised personal tax allowance meaning only earnings over 9,025 a year will be taxed. This would appease those at the lower end of the pay scale.
While the Opposition leader, Ed Miliband, was critical of the top rate tax cut saying it was benefiting the rich, calling it a "millionaire's budget," the chancellor claimed the top rate had raised only £100 million a year and was damaging Britain's image as a global centre for wealth generation.
Having decided against further spending cuts, Osborne launched a series of measures to fund the corporation tax cut and the hike in the personal allowance, which will reduce the exchequer's revenue by a combined figure of £17 billion over the next five years. He said he would raise £3 billion this period by freezing tax allowance for pensioners in a politically risky move that was quickly and mockingly dubbed "granny tax."
He announced an increase in stamps duty from 5 per cent to 7 per cent on houses priced from £2 million which will hit buyers — numerous of them from overseas — of Britain's most expensive properties, mostly located in London. There will also be the closure of a loophole that allows wealthy home buyers to avoid stamp duty by purchasing a £2 million property using a company. The chancellor would consider an annual charge for those who had used this method in the past. The risk here, however, is that the move may damage genuine investment in British property.