Corporation tax hike driven by politics, not economics
22 March 2023
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In the Media
In the Media
Christopher Snowdon appears on GB News
22 March 2023
Housing and Planning
Andrew Lilico writes in The Telegraph
IEA Fellow Andrew Lilico has written in The Telegraph criticising the increase in corporation tax from 19 per cent to 25 per cent.
Andrew wrote:
“By introducing special short-term allowances governments can bring investment forward in periods when the economy would otherwise be expected to be performing poorly.
“That can help with macroeconomic management. Such complexity can also allow governments to favour politically useful industrial sectors – for instance, in parts of the country where they hope to increase their vote; or in sectors the government has ‘picked’ as future growth ‘champions’ in industrial or regional strategy.
“Full expensing is a tax distortion.
“It means that a firm that rents its machines is in a worse tax position than a firm that buys machines, and a firm that buys second-hand machines is in a worse tax position than a firm that buys new machines.
“But on this occasion, there was an awful lot of politics about the headline rate. When Boris Johnson’s government originally announced the rate rise to 25 per cent, it was in the context of President Joe Biden trying to get international agreement for a minimum corporation tax with some discussion that the minimum might be as high as 25 per cent.”
The full piece can be read here.
Andrew wrote:
“By introducing special short-term allowances governments can bring investment forward in periods when the economy would otherwise be expected to be performing poorly.
“That can help with macroeconomic management. Such complexity can also allow governments to favour politically useful industrial sectors – for instance, in parts of the country where they hope to increase their vote; or in sectors the government has ‘picked’ as future growth ‘champions’ in industrial or regional strategy.
“Full expensing is a tax distortion.
“It means that a firm that rents its machines is in a worse tax position than a firm that buys machines, and a firm that buys second-hand machines is in a worse tax position than a firm that buys new machines.
“But on this occasion, there was an awful lot of politics about the headline rate. When Boris Johnson’s government originally announced the rate rise to 25 per cent, it was in the context of President Joe Biden trying to get international agreement for a minimum corporation tax with some discussion that the minimum might be as high as 25 per cent.”
The full piece can be read here.
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