When will the government come clean on future tax rises?
Over the last few weeks we have seen the UK government attacking Middle England and those on higher incomes in the UK with a suggestion that more tax rises are on the way. It is widely regarded that this particular strategy has been introduced purely and simply to firm up traditional Labour support which has predominately centred round those at the lower end of the income scale. However, will an increase in taxation on higher earners be enough to pull the UK economy back on to the growth path and reduce the budget deficit?
The simple answer is, no, with a growing belief that taxes across the board, both for low income earners and high income earners, will need to increase significantly in the short to medium term. However, these tax increases, and reductions in public sector investment, will not come into play until after the election when the government is widely expected to "come clean". As we approach the election there is more and more pressure on Alistair Darling and Gordon Brown to clarify the tax situation with rumours that the government has already pencilled in a 20% VAT rate in the short to medium term.
UK voters are becoming more and more aware of the risk of a general increase in taxation, both direct and indirect taxes, in the short to medium term and the government's current strategy of secrecy could backfire.
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