Hey, nonne, yes GRUNTS OF dismay are greeting Stephen Dorrell.
He has been briefed to review the flow of funds to industry, and has focused on the way that dividends are taxed. Does the tax structure, he wants to know, make companies pay out more than they should? That sounds to me like a nonne question, meaning that (as the grammarians say) it expects the answer Yes. The markets now expect to see that answer show up in the Budget, with heavier taxes on dividends, and share prices have suffered accordingly. There is more to this than Mr Dorrell's brief suggests. The Chancellor has £37 bil- lion to borrow this year, and every penny helps. The Treasury is pursuing an unde- clared war on the two biggest tax-free areas in our system — house ownership, and funded pensions. It is whittling away at the tax relief on mortgage interest. As for the pension funds, the previous Chancellor took a surreptitious bite out of their income on the pretext of simplifying corporation tax, and I am sure that Mr Dorrell can think up another pretext for another bite. It is one way, though a crude way, to even up the taxation of savings. The individual shareholder pays up to 43 per cent tax on his dividends and 40 per cent on his capital gains. The investments that are held in his pension fund bear little tax or none at all. It is extraordinary that a Conservative govern- ment should let the tax system be weighted against personal ownership. I wish Mr Dor- rell had been briefed to review the taxation of savings — but perhaps, behind the scenes, he has.
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