LONDON (AP) — UK Treasury chief George Osborne unveiled plans Wednesday to crack down on multinational tax avoiders as he sought to deflect criticism for failing to meet his budget targets.
In one of his last major speeches before May's general election, Osborne trumpeted the fact that Britain is one of the world's fastest growing developed economies at a time when much of Europe is barely growing.
The independent Office for Budget Responsibility raised its prediction for U.K. growth this year to 3 percent, from the 2.7 percent prediction in March. And though growth is expected to slow to 2.4 percent next year, the U.K. economy will still be performing better than most of its peers.
Despite the solid growth performance, the U.K.'s public finances have not improved as much as Osborne anticipated when he laid out the Conservative-led government's deficit-reduction strategy in June 2010. And that it seems is due to the failure of tax revenues to pick up as anticipated, possibly because many of the jobs created are low paid.
While the budget deficit is falling, the OBR said the shortfall will be 91.3 billion pounds ($143.2 billion) in 2014-15 or 2.7 percent of GDP. Next year, it's projected to fall to 75.9 billion pounds, or 2.2 percent of GDP. In 2010, Osborne had laid out the hope of clearing the deficit by the time of the election.
With the deficit proving harder than planned to deal with, Osborne announced plans for an "economic activity tax" on multinationals.
Dubbed by the media as the "Google Tax," it levies a 25 percent charge on profit generated in Britain, regardless of where companies are based. It is expected to raise 1 billion pounds over 5 years.
"Some of the largest companies in the world, including those in the tech sector, use elaborate structures to avoid paying taxes," Osborne said.
Osborne also announced a reform of the levies on house purchases, saying the changes to so-called stamp duty will benefit 98 percent of homebuyers. The reform is seen as a move to outflank Labour's so-called "mansion tax" on expensive homes.
Labour's economic spokesman, Ed Balls, slammed Osborne's prescription say the main beneficiaries have been the rich.
"For all his strutting, for all his preening, for all his claims to have fixed the economy, he promised to make people better off, working people are worse off," he said.