Corporation tax cut: Finally some good post-Brexit news
Much of the business news to come out since Britain took its decision to leave the EU has had a gloomy edge to it. The results of a YouGov poll released on Thursday showed that the number of businesses pessimistic about the future had almost doubled from 25% before the referendum to 49% afterwards.
Also earlier this week, the Federation of Small Businesses (FSB) urged political leaders to step up, after their small business confidence index slipped to a four-year low.
In response to calls for strong political leadership, George Osborne’s proposed slashing the rate of corporation tax to less than 15%, a move that would provide a lot of welcome relief to small businesses struggling with the aftermath of Brexit.
In an interview with the Financial Times, George Osborne said that he wanted to cut the tax, which is paid by small companies as well as large corporations, to try and bolster confidence in the economy.
A rate of 15% or below would give Britain one of the lowest corporation tax rates in Europe and the lowest of any major economy.
This, Osborne told the Financial Times, would help transform post-Brexit Britain into a “super competitive economy” with low business taxes and a global focus.
It would also demonstrate to investors that Britain was “open for business.”
For smaller companies, a lower rate of corporation tax will provide welcome relief, with many small company owners predicting some difficult times ahead.
Smaller companies that operate in B2B sectors should, by Osborne’s reckoning, benefit from higher levels of corporate investment in the UK as well. Although the proposal would have the most immediate impact on larger corporations, it is likely to lead to inward investment that will benefit smaller companies too.
The TaxPayers’ Alliance, which has previously criticised corporation tax as ‘fundamentally unsuitable,’ welcomed the proposed cut. Chief Executive Jonathan Isaby claimed that “it would show that the UK is ready to seize new opportunities in the global economy.”
Isaby even went further arguing that the Chancellor should be bold and cut the rate to 10%.
Conversely, Labour’s John McDonnell suggested the Chancellor wanted to create a giant tax haven and said he should be focussed on investment instead of tax cuts.
Others have raised concerns that reducing corporation tax could irk EU diplomats with which Britain still needs to negotiate its exit.
And others still have suggested that Osborne will not be in a job long enough to see through these changes. Whether the next chancellor will continue with Osborne’s plans will remain to be seen. Small businesses will hope for a quick and decisive leadership contest, so the next generation of leaders can get on with steering the country.