The Budget of London - Assignment Example

The London economy in the recent past received a lot of scrutiny because of the strenuous living conditions its citizens. Many businesses are under threat of closure due to the depreciated value of the euro. The citizens living in and around the capital hope that the budget speech delivered be the chancellor changes things. A lot of changes in the budget speech is evident. Fighting the transactions tax is an example of the counter measures employed in the budget. The chancellor is unsure of the reaction the budget is going to have on London citizens. The major goal of the budget is to bring down the deficit levels while trying to encourage innovation. A budget describes a financial plan. It is a list of all expected revenues and expenses. It contains all calculations about what one earns and how he spends the earnings. This is a satisfactory plan for making savings, spending and borrowing. A budget is a plan for an organization written in monetary definitions. It is a critical factor in microeconomics. A budget line describes the amount of time required to implement the budget and after how long it takes to revise it (Cope, 2008). Cost increase describes an unforeseen incurred in addition, to the budget plan. This occurs when underestimation of the resources occurs. Cost escalations describe costs that arise during the implementation period of the budget. This is as a result of losses, increased prices of goods and services and poor planning. Budget crisis describes a situation where a budget fails the implementation stage. If a budget does not pass, a crisis takes place in order to try and reinstate the bill. A budget has the following advantages: i. It helps implement the cost constraint factor for projects. This helps reduce wastage of available resources. This maximizes the potential for the available resources. ii. It helps determine how businesses perform when certain events, strategies and plans come into use. iii. It helps determine the financial state of a business enterprise. iv. It helps motivate managers to achieve the budget goals. v. It helps organizations monitor and evaluate how managers perform. vi. It is useful in controlling resources. There are various types of budgets. The classifications depend on the business type and the amount of money that needs budgeting. Some of the budget types discussed are:- i. Business start-up budget This is a budget that consists of all calculations for resources needed for stating a business. The budget starts with a calculation of all important purchases. These include sources of capital, services, collateral and tangible assets. The budget explains the importance of each resource. The budget also states an expected result of the business activities. ii. Corporate budget Corporate budgets define the business activities of a company. An annual compilation of the budgets keeps managers aware of all the activities of the business. Its timeline is usually over a period of one year. Modern techniques like using software applications help personnel in various departments to put down their expected incomes and spending in the annual, final budget. After reviewing, if the two figures are close then it shows that the managers of the business are aware of what they are doing (Cope, 2008). iii. Event management budget Budgets are particularly essential tools for event organizers and managers. They need to make correct estimations of the resources needed, costs and the number. Under-estimation of all these factors brings about losses on the part of the organizer. iv. Government budget This is an executive summary of all the intended and expected revenues and expenses for a government. Policing London Business Citizens and small businesses in London paid keen attention to the budget contents on 28thMarch 2012. The chancellor delivered the budget speech. The London economy suffers a crisis despite moves like the Olympic game celebrations. Citizens hoped that the bill contained reputable news with the state of the economy slowly crumbling. The bill aimed at improving the integration between MPA/MPS businesses and financial planning. Majority of London’s enterprise leaders, optimistic that their 12 month prospects bear fruit. This according to a research is the lowest level of confidence reading among citizens of London. However, with this budget the chancellor faces several challenges. The challenge comes in lowering the high budget deficit and at the same time encouraging growth. The people hope that the budget will not disclose a lot of information. Corporation tax Corporate tax refers to tax charged on institutions in a foreign country. The tax is for income that these companies generate in their business activities. Partnerships are not susceptible to tax. Majority of countries charges tax on all types of organizations conducting business in their jurisdiction. This helps in development strategies planned by governments. There are many businesses around the London capital. This provides some significance to the economy of London. With the growing number of organizations coming up, the tax derived from their incomes proves vital in the growth and development of industries, infrastructure, providing quality education and better health care (Cope, 2008). Financial transactions tax Financial transactions tax describes a levy placed on types of monetary transactions for purposes. This tax needs a transaction for implementation. If businesses do not indulge in transactions not described as taxable transactions, then it does not submit to the financial transactions tax. The chancellor delivering the speech has a task of making use of the budget attack the European Union's proposal to introduce the financial transactions tax. If the financial transactions tax works, it means that businesses that have no taxable transactions should not be taxed. In the light of trying to stabilize the economy, this is a leading setback to the government. The chancellor's speech helps highlight the significance of London’s financial services industries, especially in the capital. The European Union forgets that London is a leading worldwide business and financial centre. It is also the success behind the rest of the regions around the London capital. GAAR General Anti-Avoidance Rule describes a set of rules and policies included to aid in fighting tax avoidance. The government plans to introduce this rule to beat tax evaders that are rampant in London. Although it is a brilliant idea, it affects the tax system already in place. New review must take place for the GAAR to be implemented. The GAAR has the potential of scaring new investors in the capital. With this introduction of GAAR, these companies have to be taxed at all levels of transactions. Many businesses have to conform to the new tax rules and some foresee closure. Businesses that offer food products and services suffer positive effects of the GAAR rule. These types of business pay lesser taxes to the government. If the GAAR rule makes way for introduction, the businesses have to pay additional taxes meaning lower profits for the entrepreneurs. This will lower the corporate finance of the London community (Cope, 2008). Enterprise zones Enterprise zones are areas designed to encourage investments by potential entrepreneurs. The government allows companies to put up their businesses in blighted areas in order to try and improve these areas through taxes charged. These areas are slow on development and need infrastructure, exemplary schools and better health care centres as compared to the urban centres. The government makes sure that the areas are free of particular federal, local, state taxes and restrictions. In London, various locations are remote, and the government encourages potential investors to put up industries here. This is to help divert investment away from the already flooded capital. The chancellor’s move to increase the minimum capital allowance percentage for investing enterprises around the capital solves the problem of congestion in the capital. This discourages potential investors who plan to indulge in business around the capital. The plan is to improve areas of West Midlands, the North East, the Tees Valleys, Sheffield, Liverpool and Humberside. The aim is to try and rebalance the London economy. Parts of the South East have a majority of investments, and the budget seeks to draw away attention from these areas. Conclusion Many businesses exist in the United Kingdom’s geographical coverage. In turn, many cities exist in this country. They include the following Derby, Birmingham, Portsmouth, Bradford, Sheffield, Leicester, Newport and London to mention a few. Budgeting for businesses in these towns requires a lot of planning and strategic implementation (Cope, 2008). With the economic crisis at a high peak, the government plans to reduce the deficit and encourage growth for businesses and the residents of these cities and towns. Increasing the minimum capital allowance for investing companies in the capital redirects the investors to the local and remote areas. Residents of these remote areas benefit from the services offered by these companies. Their standards of living improve. The improvement comes as a result of employment opportunities in these industries. The government also improves these areas by advancing infrastructure, building health centres, constructing schools that the local citizens access at fair prices. The costs of living go down with availability of resources. These companies provide services to the community as a show of gratitude for accepting them as part of the community. The General Anti-Avoidance rule implementation is essential in making sure that large companies pay taxes for all their business transactions. The funds taxed move to help raise the small, upcoming enterprises in local and remote areas. Although its implementation has flaws, it helps to improve the economic status facing the country (Cope, 2008). The budget proposal for London businesses has to reduce the amount of tax payable to the government. These small businesses need a lot of capital investments in order to grow. Taxing them for all transactions lowers profits and in turn reduces chances of growing. A better solution is taxing each and every company according to their annual profit and loss accounts. Taxing hefty taxes on small businesses in and around the London capital slows their expansion. Large companies making millions in profits experience little difference in the incomes after taxation. A policy to balance these incomes is necessary to enable equal distribution of resources to the urban and rural areas. In conclusion, the budget plan for London businesses needs review if the economy crisis is to improve. This in the long run seeks to balance the economy by diverting resources to the rural areas. The budget appraises the taxes on different businesses, finding equilibrium in all the large and small enterprises. Reference Cope, J. M., 2008. Business Taxation: Policy & Practice the VNR series in accounting and finance. Taylor & Francis. Read More