What might the election mean for corporation tax rates—and how do we compare with other countries?by Tom Clark / November 12, 2019 / Leave a comment
The stark economic choice in the coming election can be clearly seen in rival plans for taxing companies. Conservative chancellors have chopped corporation tax rates for a decade, and plan to go further next year. Jeremy Corbyn (unlike New Labour, which started the trimming) plans a dramatic reversal.
The main tax rate, which was 30 per cent in 2008, is set to come down to just 17 points—but Labour would whack it back up to 26. And if we factor in its plans to hand staff shares in their companies (and claim some of the dividends for the Exchequer) as a tax too, then we’re at a rate equivalent to 31 per cent. On this measure, Labour is looking to tax profits almost twice as much as the Tories.
Can it be done? Well, the trend in Europe and the wider world has also been towards lower rates, but elsewhere the decline has been much more gradual. Labour can fairly point out that a rate of 28 or even 31 per cent would still leave British business in roughly the same place as French and German firms.
The Tories prefer the idea of an offshore UK competing for global investment, and point out that revenues have held up despite the rate cuts. That’s true, but a bit misleading: they’ve only been maintained by restricting various business allowances. The official estimates suggest that every additional point on the rate still brings in £2-3bn a year—real money, even if some of it could disappear if the rise were too far or too fast. Besides, in what some fear could be a “fuck business” Brexit environment, the most taxing problem for companies might not be taxation at all.