A well trailed increase to corporation tax dominated the headlines in the wake of the budget.
However, businesses will benefit from a massive tax giveaway before any tax rises take effect.
The UK has long been a frontrunner in the corporation tax “race to the bottom”. At first glance the promised hike in the rate from 19% to 25% looks like a major win for tax justice. We’ve long argued that an ultra-low corporation tax rate does little to stimulate investment.
But the rise in 2023 comes just ahead of a planned 2024 general election. The pressure on the Chancellor to cave and drop the tax rise will be immense.
Big business was also given a whopping £25 billion tax giveaway in the shape of a “super-deduction” for investment. The Chancellor described it as the “biggest business tax cut in history”.
It wasn’t the only cut announced. For all the Prime Minister’s promises that there would be no return to austerity, the budget included £15 billion a year of cuts to public services.
Meanwhile “a tsunami of jobs” was the spin promised to Teeside as one of eight locations awarded freeport status. Freeports are low tax, low regulation zones meant to encourage investment. But as we have argued before, it’s hard to see how freeports will amount to more than glorified business parks with a smattering of low skilled, poorly paid jobs.
There was nothing on capital gains tax or other potentially progressive changes to the way we tax wealth. All eyes will now focus on the Treasury’s planned “Tax Day” due to take place on the 23 March, where it’s possible more may emerge.
It’s important to claim victory when it happens. The corporation tax rise ends a decade of ideology that the only way for business tax is down. But we still have a long way to go before we see true tax justice.
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