Latest news with #taxReform
Telegraph
a day ago
- Business
- Telegraph
Labour tax raid on farmers to cost Treasury up to £2bn
Rachel Reeves's tax raid on farmers will cost the Treasury almost £2bn, analysis has found, despite Treasury claims that it could boost the public purse by as much as £1.8bn. Inheritance tax reforms due to come into force next April will cause family businesses to slash investment and jobs and lead to a slowdown in the economy, according to independent consultants at CBI Economics. Its estimates suggest that changes to business property relief (BPR) and Agricultural Property Relief (APR) will backfire and, instead of saving money, it will cost the Treasury £1.9bn by 2030. Under the changes, inherited farms worth more than £1m will be taxed at a rate of 20pc after having been shielded from the levies for decades – while a 20pc rate will also be charged on inherited business assets over £1m when someone dies. The Government has said it is expecting to raise £1.8bn from family-owned businesses and farms from the reforms by 2030. Analysis from the Office for Budget Responsibility last October said this estimate accounted for how business owners and farmers would respond to the policies, although admitted the costing had a 'high degree of uncertainty'. Family Business UK, the industry group which commissioned the research, said: 'Far from increasing tax receipts into the Treasury and stimulating the economic growth the Government is trying to deliver, the changes to BPR and APR in the October Budget achieve the opposite.' The organisation said the Government risked 'inadvertently undermining [its] mission of sustained economic growth, which we agree is an absolute necessity to deliver prosperity and improved living standards for working people'. The analysis found that more than 60pc of family businesses and farms were planning to reduce investment by over a fifth in light of the changes. Around a quarter have already cut staff. By the end of this parliament, more than 200,000 jobs are expected to be lost, the research showed. Areas including Yorkshire, the East of England and Northern Ireland are expected to be the hardest hit. Report must 'serve as a wake-up call to Treasury' It comes amid a growing backlash over the inheritance tax raid and calls for the reforms to be delayed. Charities have reported a surge in calls from distressed business-owners. In November, John Charlesworth, 78, took his own life after his family said he had been 'eaten away' by fear of the tax raid. Neil Davy, chief executive of Family Business UK, said the findings showed 'just how far-reaching, and immediate, the impact of these policy changes is'. He added: 'No industry, sector, region or parliamentary constituency will be immune... The Government must urgently reconsider these policy changes.' Tom Bradshaw, president of the National Farmers Union, said: 'This report must serve as a wake-up call to Treasury, or we face major cuts to investment and significant job losses.' Mo Metcalf-Fisher of the Countryside Alliance said: 'It would be an act of foolishness to ignore the very real and irreversible damage these changes pose to the stability of the agricultural sector.' Meanwhile, Andrew Griffith, the shadow business secretary, said: 'Labour plan to steal the futures of a generation of entrepreneurs on the back of some hooky treasury maths and a blatant breach of election promises. 'The Conservative position is crystal clear. A family business death tax has no place in a society where we celebrate risk takers and wealth creators. No if's or buts. Our first Conservative budget will reverse this damaging measure.' Separate data published on Monday showed the impact Labour's tax policies are having on the economy. Estimates compiled by former Treasury economist Chris Walker found at least 10pc of non-doms have already left the UK in the wake of Labour's crackdown. If more than 25pc of non-doms leave the UK, forecasts suggest the Treasury would start losing revenue. Analysts have suggested the crackdown on non-doms could cost the UK more than £10bn a year in lost economic growth. A Treasury spokesman said: 'Our reforms to Agricultural and Business Property Reliefs will mean three quarters of estates will continue to pay no inheritance tax at all, while the remaining quarter will pay half the inheritance tax that most estates pay, and payments can be spread over 10 years, interest-free. 'This is a fair and balanced approach which helps fix the public services we all rely on'
CBS News
4 days ago
- Business
- CBS News
New law closes massive tax loophole CBS News Texas discovered that allowed developers to avoid paying millions
A new law has taken immediate effect this week with Gov. Greg Abbott's signature, abolishing a loophole in the law that the CBS News Texas I-Team first brought to light over a year ago. "I'm happy. I'm ecstatic," said Arlington Mayor Jim Ross of the new law. For months, he's been pleading with Texas lawmakers to put a stop to what's known as "travelling HFCs", a practice that's allowed real estate developers to avoid hundreds of millions of dollars in taxes. "I was pissed. I still am," he told CBS News Texas in March. Housing Finance Corporations, or HFCs, are non-profits set up by cities or counties. They're intended to help them create affordable housing in their own communities. The I-Team found evidence, though, that that's not always what has happened. CBS News Texas discovered four small Texas cities (Pecos, Pleasanton, Edcouch, and La Villa) and two small counties (Maverick County and Cameron County) – none of them within three hundred miles of the metroplex - have used their HFCS to give North Texas developers huge tax breaks in exchange for money. In many cases, we learned, they've done it without even notifying the local community, affected by the significant loss of tax revenue. North Texas city leaders have told us it's forced them to consider raising taxes or cutting back on services. "We have to find ways to make up the millions and millions of dollars – and if you look statewide, it's billions of dollars - that come off the tax roll," said Ross. The Texas House and Senate this month each passed House Bill 21 with a two-thirds majority, allowing it to take immediate effect. It makes it illegal for HFCs to approve any further deals outside the boundaries of the city or county that created them without explicit permission from the affected taxing entities. The bill's author, State Rep. Gary Gates, said it also puts new requirements on the hundreds of out-of-town HFC deals that have already been made. "It gives them until January 1 of 2027, so that's about 18 months, to go to the city or county where the property is located and get an agreement to continue," said Gates. And, if they don't get approval? "Well, then they'll have to start paying property taxes," said Gates. The reform bill will put stricter rules in place for traditional HFCs, too – the kind working within the cities and counties that established them. That's prompted opposition from groups like the Texas Association of Local Housing Finance Agencies, which says no one took issue with HFCs before bad actors began making out-of-town deals two years ago. "It went far beyond just solving the travelling HFC issue," said TALHFA's Todd Kerchevel of the reform bill. Any developer getting a tax break through an HFC will now have to prove at least half of the savings they get for a multi-family housing project is used to lower the price of rent there. The exact dollar figure will change year to year, which critics say could make things tricky. "They're trying to hit a moving target, by doing that it puts their tax exemption in jeopardy and by putting your tax exemption in jeopardy, you put your financing in jeopardy," said Kercheval. But, in Arlington, a city with its own HFC, Ross doesn't see a problem. "Is there any concern that this could stop sort of legitimate affordable housing efforts?" CBS News Texas asked him. "None. Not from our perspective. We're very confident in our HFC and what they're doing. Other cities around the state are just as confident with theirs," he said.
Forbes
6 days ago
- Business
- Forbes
Investment Income Tax Developments In Washington & The States
The move toward lower and flatter personal income tax rates is persisting as a dominant state policy trend in 2025. Mississippi Governor Tate Reeves (R-Miss.) and Oklahoma Governor Kevin Stitt (R-Okla.) enacted legislation this spring to phase out their income taxes in the coming years, while Governor Greg Gianforte (R-Mt.) signed into law the largest income tax cut in Montana's history. This year, however, state lawmakers have also made strides when it comes to reducing and repealing taxes on investment income. In Missouri, for example, Governor Mike Kehoe (R-Mo.) is preparing to sign a bill passed by legislators in April that will eliminate Missouri's capital gains tax. 'Once Gov. Mike Kehoe, who has reportedly expressed strong support for the idea, signs the bill, Missouri will become the first state in the nation to fully exempt profits from the sale of stocks, real estate, cryptocurrency, and other capital assets from state income tax,' Kiplinger reported in early May. 'Proponents argue the move will encourage investment in The Show-Me State and potentially spur job creation and economic growth.' 'This legislation is about creating a fairer tax system that supports growth and empowers individuals to keep more of their hard-earned money,' said Missouri Speaker Pro Tem Chad Perkins (R). 'I firmly believe this bill will have a great positive impact on our state's economy and the financial well-being of our citizens.' Representative George Hruza (R), who cosponsored the capital gains repeal bill with Representative Perkins, said the move will 'turbocharge Missouri's economy.' Days after Missouri lawmakers voted to repeal their capital gains tax, Governor Greg Abbott (R-Texas) approved a constitutional amendment that would prohibit the imposition of a capital gains tax in the Lone Star State. Texas, one of eight no-income-tax states, already has a constitutional prohibition on taxing wages. 'Voters will vote on this to ensure that we're not going to have a capital gains tax in Texas,' Governor Abbott said on May 14 immediately after signing the joint resolution to refer the capital gains tax prohibition to the ballot. 'The next tax law that I will sign will be a tax law to reduce your property taxes in Texas.' Recent developments in Texas and Missouri follow the completion in recent years of investment income tax phaseouts in Tennessee and New Hampshire. While state lawmakers have had success when it comes to improving the tax treatment of investment income, Republicans in Congress have faced pressure to raise federal tax rates on capital gains, namely in the form of a tax hike on what's referred to as 'carried interest.' Carried interest, a form of capital gain, refers to the share of a private equity fund's return on investment that is paid out to fund managers. The U.S. House passed a tax bill last week that will ensure the income tax rate cuts enacted as part of 2017's Tax Cuts and Jobs Act (TCJA), which provided a net tax cut to the vast majority of households, do not expire at the end of the year. As the debate moves over to the Senate, President Donald Trump (R), Speaker Mike Johnson (R-La.), and congressional Republicans are saying they would like to enact the tax bill before the Fourth of July. Despite pressure to 'pay for' maintenance of current federal income tax rates with offsetting tax hikes, the House-passed budget reconciliation package does not raise taxes on carried interest. House Republicans' rejection of calls for a carried interest tax hike is a relief to many of those who are concerned that such a tax hike, aside from direct adverse effects, would serve as the camel's nose under the tent in a longer term effort to raise rates on all capital gains. 'Democrats not only want to tax capital gains at ordinary income tax rates—over 40% all-in federally—they want this tax rate to apply to phantom gains derived merely from price inflation,' says Ryan Ellis, president of the Center for a Free Economy and an IRS-enrolled agent in charge of a tax preparation firm. 'It's gets worse, as some of them even want to tax gains before they are gains, before an investor sells.' Many progressives in Congress don't like that capital gains are taxed at a lower rate than wage income. Though passing a capital gains tax increase would be a heavy lift even in a Democrat-led federal government, politicians on both sides of the aisle have expressed interest in singling out carried interest as special form of capital gain that should be taxed at a higher rate. With the rising tide of populism, many Republicans across the country have increasingly taken to demonization of banks, hedge funds, private equity firms, and large companies in general. Yet, by targeting private equity with more punitive tax rates, Congress would end up harming the retirement plans for millions of public sector workers in nearly every state. In February, for example, the South Carolina Retirement System Investment Commission allocated $260 million to private equity funds. Public pension investment in private equity is not unique to South Carolina or to only red states. In fact, public pension funds in most states have made similar investments in private equity. Governor Tim Walz (D-Minn.), for example, has 17% of Minnesota's combined pension funds invested in private equity. The belief that raising taxes on carried interest would be economically harmful is not limited to columnists, policy analysts, and those who work in private equity. It's also shared by leaders on Capitol Hill and key members of the Trump administration. 'Private equity is growing our economy and boosting the retirement savings of working Americans,' said Senator Tommy Tuberville (R-Ala.). 'Jacking up taxes on carried interest will kill the goose that laid the golden egg.' Kevin Hassett, director of the White House National Economic Council, discussed the adverse effects that would come with a tax hike on carried interest in a 2010 policy brief for the American Enterprise Institute. In that brief, Hassett wrote that a tax hike on carried interest 'would be unwise to adopt' and that 'there is no compelling case that it will produce a more efficient allocation of capital.' Many believe the Tax Cuts and Jobs Act took the right approach to carried interest. The TCJA did not raise the tax rate on carried interest, but increased the timeline for investment after which the capital gains tax rate would apply. 'President Trump's tax law struck the right balance in 2017,' says Drew Maloney, president and CEO of the American Investment Council. 'A new 40.8% tax rate would be higher than China, Europe and Canada and would make the U.S. less competitive.' Critics of raising taxes on carried interest point out that higher tax rates on carried interest mean less capital to invest in the U.S., harming the overall economy. A 2022 Ernst & Young report estimated private equity's entire contribution to the domestic economy: 'In total, the US private equity sector, the sector's US suppliers, and the related US consumer spending supported an estimated 31.3 million workers earning $2.4 trillion in wages and benefits and generating $4.0 trillion in US GDP in 2022. PE-backed small businesses, their suppliers, and related consumer spending (i.e., a subset of this) together supported 4.4 million workers earning $360 billion in wages and benefits and generating $615 billion GDP. Additionally, the federal, state, and local taxes paid by, and related to, the US private equity sector totaled more than $700 billion in 2022.' Sen. Tim Scott (R-S.C.), a member of the Finance Committee, said he is 'excited about the future of private equity in South Carolina.' One thing that could curb that excitement is a tax hike on carried interest. Furthermore, for governors and legislators who have have been working hard to make their tax codes more conducive to investment, a federal tax hike on investment or wage income would counteract the benefits of pro-growth state reforms. Senator Scott and his colleagues, however, will soon have the opportunity to take federal tax threats off the table when they take up the House-passed tax bill.
Arab News
6 days ago
- Business
- Arab News
IMF says Egypt making progress, still needs to widen tax base
CAIRO: Egypt has made progress toward macroeconomic stability and has been streamlining tax and customs procedures, but still needs to widen its tax base, the International Monetary Fund said on Tuesday after a review mission to the country. An IMF team visited Egypt from May 6 to May 18 as part of its fifth review of an $8 billion financial support agreement signed in March 2024. 'Egypt has made substantial progress toward macroeconomic stability,' said IMF Mission Chief for Egypt Vladkova Hollar, who led the team. 'Growth is expected to continue strengthening, and we upgraded our forecast for FY24/25 to 3.8 percent, in light of the stronger-than-expected outturn in the first half of the year,' Hollar said in a statement. A Reuters poll of 17 analysts last month also forecast growth of 3.8 percent in the 2024/25 fiscal year, which began in July. Egypt's central bank said last week the economy grew by 4.3 percent in the October-December quarter and projected it would grow by 5.0 percent in January-March. The IMF statement said better oversight and control over large public sector infrastructure projects was helping to contain demand pressure. The authorities were working to modernize and streamline tax and customs procedures, it added. 'These reforms are starting to yield positive results. Alongside these efforts, domestic revenue mobilization will need to continue, mainly by widening the tax base and streamlining tax exemptions,' it added. The IMF approved its fourth review of the program in March, unlocking a disbursement of $1.2 billion.
Zawya
6 days ago
- Business
- Zawya
IMF says Egypt making progress, still needs to widen tax base
CAIRO: Egypt has made progress towards macroeconomic stability and has been streamlining tax and customs procedures, but still needs to widen its tax base, the International Monetary Fund said on Tuesday after a review mission to the country. An IMF team visited Egypt from May 6 to May 18 as part of its fifth review of an $8 billion financial support agreement signed in March 2024. "Egypt has made substantial progress toward macroeconomic stability," said IMF Mission Chief for Egypt Vladkova Hollar, who led the team. "Growth is expected to continue strengthening, and we upgraded our forecast for FY24/25 to 3.8%, in light of the stronger-than-expected outturn in the first half of the year," Hollar said in a statement. A Reuters poll of 17 analysts last month also forecast growth of 3.8% in the 2024/25 fiscal year which began in July. Egypt's central bank said last week the economy grew by 4.3% in the October-December quarter and projected it would grow by 5.0% in January-March. The IMF statement said better oversight and control over large public sector infrastructure projects was helping to contain demand pressure. The authorities were working to modernize and streamline tax and customs procedures, it added. "These reforms are starting to yield positive results. Alongside these efforts, domestic revenue mobilization will need to continue, mainly by widening the tax base and streamlining tax exemptions," it added. The IMF approved its fourth review of the programme in March, unlocking a disbursement of $1.2 billion. (Reporting by Patrick Werr and Jaidaa Taha; Editing by David Gregorio)
