📢Some important background info for those reading the Chancellor’s budget tomorrow –

If she increases employer NICs, it will raise a lot less revenue than appears on the scorecard – i.e. the overall tax rise will be much smaller than first appears

This is because … The scorecard will not account for the fact that higher employer NICs MUST lower some other tax bases – e.g. lowering firms’ profits or workers' wages

This knock-on effect will be picked up in the OBR’s overall modelling of profits, wages & tax revenues

The UK has a temporary policy of allowing ‘full expensing’ of investment for corporation tax

The Chancellor has said that, if cutting taxes, his “first priority would be business tax cuts”

Should full expensing be made permanent?

4 key points from our new report...🧵

https://twitter.com/TheIFS/status/1710180838858776660

1. Full expensing would cost ~£1-3bn for each year it was in place

Much lower than the roughly £10 billion p.a up-front cost shown in the scorecard - most of the upfront cost is recouped in future years

Short-run scorecard impacts should not govern long-term policy choices

In the tax pipeline, we’ve now got: a freeze to income tax thresholds, a new higher NICs threshold, higher NICs rates and lower income tax rates. Taking all of that together, there are some short run winners, but most will pay more eventually. Specifically: … 1/n For 2022-23, those earning between around £10,000 (the current NICs threshold) and £25,000 will pay less tax on their earnings as a result of these changes. Those earning more will pay more. 2/n

Short thread on where I think we are with Business rates.
Govt launched ‘fundamental review’. Budget bought some welcome changes – more frequent revaluation, exemptions for some investments - but not fundamental reform. Problems with BR predate pandemic and will remain.
1/4 We’ve said many times- business rates are NOT killing the high street; a land value tax would keep the best bits of the system and remove the problematic bits.
Explanations here:
📜 ifs.org.uk/publications/1…
🗣️ ifs.org.uk/podcast/are-bu…
2/4

Air Passenger Duty changes will INCREASE FLYING….
OBR forecasts ~400k more flights per year.
But NOT UK EMISSIONS. Here’s why (reason is not obvious):
1/N
(from @StuartAdam_IFS
@TheIFS
presentation) Domestic flights are within UK Emissions Trading Scheme. This puts a cap on emissions from things covered. BROADLY, more emissions from domestic aviation -> more demand for permits -> higher ETS prices -> lower emissions elsewhere. Overall emissions within ETS unchanged. 2/n

In advance of package for the self-employed, here's what replacement rates (out of work income as a share of in work income) currently look like - massive increases for employees & barely any chnage for self-employed 1/n 86% of employees now have at least 80% of their net income replaced when out of work. Was 10% before recent covid measures. Self-employed have seen some increase in the social safety net via increases in generosity of universal credit, but small in comparison 2/n

We’ve been using tax records to learn about the self-employed - an interesting group because they've been fastest growing part of workforce since early 2000s. Here’s what we now know 1/n (tons more here: ifs.org.uk/publications/1…) More people try self-employment than aggregate numbers suggest – annual growth in sole traders results from huge entry & exit. Between 2011-2015, ~2.4 million sole traders operated each year but ~6m people tried self-employed at some point. Self employed are not a fixed group 2/n

There's been some discussion of this paper recently (because @TaxJusticeNet are, understandably, using estimates suggesting foreign MNEs avoid >50% of UK tax). I've read recently so here's a thread on my take of main issues. 1/ Paper uses UK corporate tax records matched to company accounts to ask how much tax MNEs avoid. Great question, cool data. (Can see what's on UK corp tax form here assets.publishing.service.gov.uk/government/upl…) 2/