Rishi Sunak sees even greater company tax of 25%
Rishi Sunak plans to raise budget corporate income tax from 19% to 25% on Wednesday March 3rd.
It used to be thought that the Chancellor was only considering getting up to 24 percent.
The Chancellor needs to raise money to make up the staggering £ 394 billion deficit facing the UK economy due to Covid-19, not least the £ 71 billion the government has spent helping businesses.
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Every percentage point raised on corporate tax rates brings an additional £ 3.3 billion in revenue. This means the Chancellor could raise nearly £ 20 billion if he increased corporate tax to 25%.
Mr Sunak is also getting political coverage because his US counterpart, Janet Yellen, recently said US corporation tax could rise from 21 percent to 28 percent. This would mean the UK could still claim to have the lowest corporate tax rate in the G7 group of developed nations. According to the Times, the first increase should be in the fall budget, with subsequent increases.
In addition, corporate tax revenue comes predominantly from a range of businesses and companies at the corporate level, as opposed to small businesses, many of which have difficulty making a profit.
Business groups have expected smaller increases, and a former Tory cabinet minister told the Financial Times that the government is putting up “front men” and that a smaller increase is likely.
“The idea of 25 percent is a bad idea and would not fly with the Tory backbenches,” the ex-minister told the newspaper. “A more modest increase is likely inevitable and probably manageable.”
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In a bizarre Alice in Wonderland moment yesterday, union leader Sir Keir Starmer accused Prime Minister Boris Johnson of planning the tax hike. Now is not the time to do it during a pandemic, he argued.
Separately, Sir Keir has called on the government to introduce Covid recovery bonds and increase funding for start-up loans to help create 100,000 small businesses.
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