Liz Truss reverses her policy on corporation tax
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Liz Truss has been told to reconsider her Government’s approach to corporation tax in order to resolve the “incoherence of the current trajectory”. The Prime Minister yesterday confirmed that she is U-turning on her plan to scrap an increase in the tax on business profits, admitting her Government’s recent ‘mini-budget’ went “faster and further” than many expected.
The rate was set to remain at 19 percent after Ms Truss promised to cancel former Chancellor Rishi Sunak’s plans to put it up.
In a statement which followed the sacking of Kwasi Kwarteng from the Cabinet, the PM said raising the figure to 25 percent would help to “reassure the markets of our fiscal discipline”.
But the Government has now been told it should reconsider its approach to corporation tax altogether in what would be seen as a “win-win” act.
The Orthodox Conservatives think tank has called for the tax to be banded, in the same way personal income tax is today.
The group argues that businesses with turnovers of less than £85,000 should not have to pay any corporation tax at all, in order to keep small businesses afloat and to incentivise entrepreneurs to set up in this country rather than elsewhere.
Those with turnovers between £85,000 and a quarter-of-a-million pounds should be charged with a rate of just 12.5 percent, it added.
This is the corporation tax rate in Ireland for most companies, which many commentators suggest has boosted the country’s favourability among businesspeople.
The Orthodox Conservatives argued that “this policy could distinguish the UK as the only G7 country to pioneer this trickle down effect for corporations; and allows for greater investment not only in start-ups but also by start-ups in their embryonic and growth stages”.
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Director Joseph Robertson told Express.co.uk that this policy “would confidently signal a repayment in trust to small businesses”.
He said: “For the Truss Cabinet, growth has to repay the conservative-minded voter; the entrepreneur and the family-run business, while still incentivising reinvestment into the economy from flourishing new businesses.
“Banding corporation tax would combine the best of both worlds, as startups and low turnover businesses would become more cash rich, in turn allowing them to assist in the project of levelling up and engaging in a clearer path to corporate social responsibility.”
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Ms Truss has made efforts to brand her Government the country’s best hope for economic growth.
In her first Conservative Party Conference speech as leader, she railed against the “anti-growth coalition”, including the opposition Labour and Liberal Democrat parties, which she argued would keep the country down.
Financial paper Bloomberg shortly after branded her first weeks in office as “the most turbulent debut of any British prime minister in peacetime”, adding: “In just three weeks, her administration has been battered by a crisis of confidence in her policies that have triggered a collapse in the pound and a surge in borrowing costs that threaten to push the UK toward a deep recession and a housing market crash.”
On the Orthodox Conservative think tank’s proposal, Mr Robertson commented: “With the incoherence of current trajectory in both Number 10 and Number 11, this is a clear, solid policy route which will allow Truss to offer a boon to the traditional Tory Party membership, while simultaneously tilting at regaining the attention of more progressive voters who see tech as the future of the country’s economy.
“It is the kind of win-win that must be acted on fast, as it could offer an explanatory follow up to the U-turn on raising corporation tax to 25 percent.”
The Treasury told Express.co.uk it would not be able to comment on tax changes outside of fiscal events.
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