Latest news with #fiscalmeasures
The Independent
a day ago
- Business
- The Independent
‘Painful' budget measures likely, say economists as Chancellor lifts spending
The Government could have to announce 'painful' fiscal measures in upcoming Budgets to balance the books after revealing fresh spending plans, economists have warned. Experts have said tax increases are 'almost inevitable' later this year in order for the Chancellor Rachel Reeves to meet her fiscal rules. On Wednesday, the Chancellor set out how she plans to spend hundreds of billions of pounds of taxpayers' money, committing to growing departmental budgets and pumping more cash into the NHS. She said previous tax increases – which included rises in company national insurance contributions in April – and looser borrowing rules have allowed higher spending on public services and increased investment. However, Ms Reeves also stressed the Labour Government is committed to her recently-revised set of fiscal rules. She is seeking to meet her fiscal rule of balancing day-to-day spending with revenues by 2029-30 while improving public services and targeting accelerated economic growth. Some economists, however, suggested on Wednesday that spending plans and pressure on the economy from international trade tensions could mean that taxes could need to be increased further to meet this. Stephen Millard, interim director of the NIESR economic research institute, said: 'The Chancellor has yet again said that her fiscal rules are non-negotiable. 'But, given the small amount of headroom at the time of the spring statement and the increases in spending announced since then, it is now almost inevitable that if she is to keep to her fiscal rules, she will have to raise taxes in the autumn budget.' Raj Badiani, economics director at S&P Global Market Intelligence, said: 'The Government will face a persistent challenge of providing substantial funding increases to health, housing, defence and infrastructure development while also ensuring adequate financing to non-protected services – all against the backdrop of meeting its non-negotiable fiscal rules. 'The goal of balancing books is likely to require a series of painful fiscal announcements, with the spending review following on from a difficult spring statement and 2024's autumn budget. 'This year's autumn budget could be another tough fiscal event, should the UK economy falter amid heightened domestic and external tensions.' The Chancellor is also under pressure to meet her pledge to deliver planned deficit reductions to reduce the UK's debt position. It came after Ms Reeves increased spending on the NHS, education and teacher pay, police forces, border security and defence. Elliott Jordan-Doak, senior UK economist at Pantheon Macroeconomics, suggested 'stealth taxes' could be used later this year to help support these funding plans but said larger hikes could be needed depending on economic forecasts. 'We think that taxes will need to rise in the coming years to meet day-to-day spending pressures on public services and generational challenges like the need for increased defence spending. 'Looking ahead to the October Budget, the Chancellor can likely cover small extra spending commitments — like reversing cuts to winter fuel payments — with hikes to duties and other 'stealth' taxes that raise prices. 'But the Government would need to break manifesto promises to hold the big tax rates steady, or change its fiscal rules, if the OBR (Office for Budget Responsibility) downgrades its view of productivity growth in the October budget.'
Malay Mail
3 days ago
- Business
- Malay Mail
Tax experts say expanded SST key step towards strengthening Malaysia's finances
KUALA LUMPUR, June 10 — The revision of Sales Tax rates and the expansion of the Service Tax scope form part of targeted fiscal measures to keep the nation's finances on a sustainable path, tax experts said. PwC Malaysia tax leader, Steve Chia, said the review of the Sales and Service Tax (SST) was expected, having been announced in Budget 2025 last October. He urged the public to view the changes in a broader fiscal context. 'Whilst it is aimed at supporting the medium-term fiscal goals, a search for a longer-term solution remains necessary to ensure a sustainable revenue contribution for the country. 'Although the current expansion is relatively broader, the government is committed to containing the scope to selected and non-essential goods and business-to-business (B2B) services to ensure that the rakyat will not be burdened,' he told Bernama. Finance Ministry II Minister, Datuk Seri Amir Hamzah Azizan, earlier announced that the government would implement the revised Sales Tax rates and expanded Service Tax scope from July 1, 2025, to strengthen the country's fiscal position and improve support for public welfare. Chia noted that a key challenge would be ensuring cascading costs are either eliminated or not passed along the value chain. 'Since the Budget 2025 announcement until now, the government has made efforts to engage with relevant stakeholders, including industry associations and tax professionals, to ensure that the revisions are well-informed and the industry impact and issues are taken into consideration. 'Therefore, the change is aimed at strengthening Malaysia's fiscal position by increasing revenue and broadening the tax base. 'We can see that the government is careful in identifying areas for rate increases and scope expansion to protect and cushion the impact on the rakyat at large,' he added. Meanwhile, KPMG Malaysia head of tax, Soh Lian Seng, noted that the current SST framework is often viewed as less comprehensive than the previous Goods and Services Tax (GST) system and is sometimes criticised for being regressive. 'This revision appears to be an effort to make the tax structure more progressive, broadening the base while ensuring that the burden does not disproportionately fall on the rakyat. 'Expanding the scope of taxable services and revising rates can help improve revenue collection, which is essential for Malaysia's medium-term fiscal consolidation,' he said. Soh emphasised that the government is likely aiming to enhance fairness and efficiency in tax collection by refining the scope and structure of the SST following the review announcement. In the meantime, Soh noted that there may be a short-term spike in consumer spending as people rush to make purchases before the new rates take effect, similar to what was observed in 2015 ahead of GST implementation. 'However, this is likely to normalise within the next few months. In regard to concerns about inflation, the impact should be modest. 'While there are exemptions and reliefs in place to cushion the impact, the net effect should still contribute positively to government coffers, supporting broader fiscal sustainability,' he added. — Bernama
Reuters
04-06-2025
- Business
- Reuters
Brazil plans to cut tax breaks, curb education spending in fiscal package, say sources
BRASILIA, June 4 (Reuters) - Brazil's government is negotiating a package of fiscal measures with congressional leaders that includes cuts to tax exemptions and limits on the growth of transfers to an education fund, according to sources familiar with the talks. After initially signaling the measures would be unveiled on Tuesday, Finance Minister Fernando Haddad said they would be disclosed only after further discussions with party leaders on Sunday. First reported by local newspaper Valor Economico and confirmed by three government sources who requested anonymity, the package is being prepared as an alternative to the controversial hike in the financial transactions tax (IOF) announced last week, which drew broad backlash from lawmakers and business sectors. The plan focuses heavily on reducing tax benefits, a longstanding target of President Luiz Inacio Lula da Silva's leftist administration, said three sources. His economic team often criticizes the volume of tax exemptions that weaken public revenues, though previous attempts to roll them back have seen limited success in Congress. That includes a payroll tax break for companies, which remains in place without due compensation. One of the sources said the new package includes a proposed constitutional amendment that would establish rules to curb growth in transfers to the Fund for the Development of Basic Education. A similar initiative in last year's fiscal package was watered down by Congress, which blocked efforts to redirect more of the fund's resources to full-time education spending. The new measures aim to create fiscal space for the government to revise the recent IOF tax decree, which increased rates on a range of credit, foreign exchange, and pension transactions.
