In what will be his last Budget speech of this coalition Government, Chancellor George Osborne is faced with a bit of a dilemma.
He must stick to the austerity commitments, which have been the hallmark of this Conservative/Liberal Democrat administration, but he must also convince the wider British public that the feel-good factor is on the way, that they will soon be better off and therefore be more inclined to vote for his party in May's general election.
Given this tough balancing act, there are few options available to Mr Osborne. I suspect this Budget will feature little in terms of tangible tax cuts or rises and will be more of a statement of intent aimed at the voters.
One of the populist measures we expect to see is a so-called 'Google Tax.' Further details are expected on this new legislation to crack down on multi-national companies that are deemed to be avoiding tax obligations by transferring revenues overseas. Given that any additional Treasury coffers resulting from this move could be used to support an increase in personal allowances up to £11,000, it could prove to be a vote winner. There are, however, significant questions over the enforceability of such rules, their impact on jobs and investment and whether they would open the door to legal challenges.
In addition to the 'diverted profits' tax the Chancellor is also expected to set out his plans on how he would require multinational companies to disclose revenues and profits on a country-by-country basis. I would also not rule out the possibility of a banks bonus tax, another measure that would curry favour amongst the public and reinforce his often repeated mantra that 'we're all in this together.'
From a wider perspective Mr Osborne will certainly be looking to introduce further powers to HMRC to recover taxes, clamp down on avoidance and improve the speed of collection.
To help fuel economic growth he may look at areas such as a possible extension to the annual investment allowance for another year at the £500,000 rate to encourage more spending amongst businesses. The rate had been due to fall to £25,000 at the end of December.
Research and Development relief has been a popular measure in helping encourage firms to invest in innovation and the Chancellor may wish to extend this to cover investment into building prototypes.
We may also see some new National Insurance incentives for small businesses to help encourage further employment.
I expect to see a more sectoral approach from the Chancellor in supporting the economy this year, especially focused on the oil and gas sector. A further cut in the ring fence corporation tax is a possibility as the Government had announced it would consider further reductions when it was lowered from 32 to 30 per cent in December.
With the consultation on the basin-wide investment allowance - the proposed replacement for the existing system of offshore field allowances - due to be published soon we should get some further details of how the Treasury will provide a stimulus for further North Sea exploration.
The mining industry has also seen its commodity price fall dramatically and has been lobbying hard for some tax breaks particularly around restorative work. Meanwhile the Scotch Whisky industry is pressing its case for a reduction in excise duty, similar to the one given to breweries last year. It is therefore possible we may see some tax breaks for these sectors.
Given we are less than two months away from one of the most unpredictable general elections in history, I expect Mr Osborne will use Wednesday as a platform to talk up the recent areas of success for the UK economy. He will need to keep his commitment to balancing the books but don't be surprised to see a few vote-enticing tax relief measures which will likely come at the expense of multinational companies and wealthy individuals.
Ricky Murray is a Glasgow-based partner at Johnston Carmichael
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