Osborne wants 3p corporation tax cut - paid for by scrapping of reliefs

This morning's Financial Times leads on a Tory proposal to reduce corporation tax from 30% to 27%.  The cut would be paid for by ending many of the reliefs that currently exist within the corporation tax system.

“This is an entirely self-contained, and self-financing, simplification of the business tax system,” George Osborne told the newspaper.

Mr Osborne's intervention will be seen as a preemptive strike before Wednesday's Budget - Mr Brown's last.  The FT:

"Treasury officials have repeatedly indicated that Wednesday’s Budget will be substantial in scope. There were indications on Sunday that Mr Brown could be planning sweeping changes in business taxation, personal tax and welfare reform."

According to The Sun, Mr Brown is planning a swoop on larger cars:

"Gas-guzzling 4x4s face a massive hike in road tax bills, Gordon Brown will announce in Wednesday’s Budget.  The cost will double to more than £400 by 2010, say industry sources.  The Chancellor wants to single out off-roaders like Range Rovers and BMW X5s that spew out huge amounts of carbon dioxide.  In last year’s Budget Mr Brown included them in his new Band G of road tax that pays £210 a year.  Eco-friendly cars with rock bottom emissions in Band A will pay NO tax at all."

Comments

[Z-lister]

My goodness - an actual policy! I'd almost forgotten what they looked like.

[Richard Tyndall]

Sad to see the Sun still pedalling the lie about Band A cars. Wasn't it shown last year that there are currently no cars available in the UK which would qualify for this band. I would have thought the Sun would have at least tried to get the story right.

Good idea from Osbourne about Corporation Tax though. Anything which simplifies the system has to be good if it is zero-change overall on the sector it is targetting.

More of this sort of thing please George.

[Richard]

Even Sweden's rate is lower than ours (28% I think). A solid idea although we'll need income tax cuts as well to prevent accusations of the Tories favouring big bigness (even though small businesses will benefit the most).

[malcolm]

I wonder if the Sun is right? Most pre budget speculation has been wildly inaccurate in recent years but I think with their close relationship the Treasury is unlikely to mislead News International.
The budget can give us a good insight into Browns electoral intentions ,if it's a giveaway budget prepare for a snap election!

[John Coles]

"""However, he said he was still cautious about accepting calls for a deeper cut in corporation tax, to 25p."""

To be so young and to be so absurdly cautious. It bespeaks a very limited intellect.

[James Maskell]

All we have is the headline. I think we need a little more detail on what the changes will mean in practice before we can really judge this.

[Mark Wadsworth]

Tax cuts good. Corporation tax cuts missing the point. Cuts in Employer's National Insurance double-plus good. It cuts payroll costs so it boosts employment AND boosts business profits for companies AS WELL AS business profits of unincorporated businesses with employees (sole traders and partnerships).

[Umbrella Man]

All motorists should resist the 4x4 tax. This is salami politics. Brown will get the Ranger Rovers first... then the BMWs... then the Mondeo drivers...

[Adrian Owens]

A step in the right direction. We need many more to get us back on the right path.

[Mark Wadsworth]

Richard 9.48. SMALL limited companies only pay 19% corporation tax. Small unincorporated businesses pay income tax not corporation tax so this doesn't help them at all.

[matthew]

"Even Sweden's rate is lower than ours (28% I think). A solid idea although we'll need income tax cuts as well to prevent accusations of the Tories favouring big bigness (even though small businesses will benefit the most)."

How do you imagine small businesses will benefit the most? Small businesses pay only 19% corporation tax. http://www.hmrc.gov.uk/rates/corp.htm

[comstock]

Sad to see the Sun still pedalling the lie about Band A cars. Wasn't it shown last year that there are currently no cars available in the UK which would qualify for this band

It was, and there still aren't any I'm afraid.

Best you can do (unless you import) is band B (120 g/km, tax 40/50 quid a year) which has a reasonable selection including Corsas, Fiestas and a diesel version of the Megane, as well as the (quite expensive) hybrids.

[Tapestry]

And he should get rid of the current system where many companies have to estimate profits and pay corporation tax in advance or current, and we should go back to the old system where corporation tax was paid at the end of the year.

Also REGULATION is bloody ludicrous. If you operate a branch in another country, you are immediately classified as a large company and fall victim to a whole range of extra regulations.

We operate a tiny assembly unit in Slovakia with turnover less than UKL100,000 per annum for low price products and have to be regulated as if we were BP as a result.

The fines we could be subjected to for not having a defence available to an impromptu inspector for our intra company pricing policy would be UKL50,000.

Get these C**** off our backs.

We need to join the global economy not be barred from it by EU and Gordon Brown taxes and regulations. No wonder 44% of EU citizens know that they are worse off because of the EU.

Let's follow the logic and get out of the damned EU thing, set ourselves free from all the red tape and tax which is throttling us into enforced low growth.

[Richard]

"Richard 9.48. SMALL limited companies only pay 19% corporation tax. Small unincorporated businesses pay income tax not corporation tax so this doesn't help them at all."

Good point, should have remembered that!

[ToMTom]

Be nice if companies like News International actually paid Corporation Tax......there are too many companies paying no Corporation Tax and it would be good if SMEs had lower Corporation Tax on Retained Earnings - that would make the Private Equity houses change their funding models

[comstock]

Be nice if companies like News International actually paid Corporation Tax.
Indeed, Tomtom, that would be nice.

Of course if I was in full blooded cynical mode I would say it isn't going to happen in this case because both main parties want/need Murdoch's support to win the next election.........

[Josh]

Not bad, not bad, not bad.

Of course, Osbourne pretends he doesn't know about supply side economics by saying the cut will be paid for by eliminating reliefs (also a good idea for its own sake) when we all know it will pay for itself through the Laffer effect.

[Martin Wright]

A welcome move in the right direction. Brown has never been able to resist introducing a plethora of micro reliefs, some worth as little as £10m a year for very specialised circumstances. The result has been ever longer Finance Bills, huge complexity and an increasing compliance burden. Even the taxmen can't keep up with Brown's minutiae.

A combination of tax reduction and administrative simplification will be good for business and for the economy as a whole. My only criticism is, as mentioned above,that this is a cautious start and doesn't actually reduce the overall tax burden on business.