The scale of George Osborne's tax giveaway to big business became very much clearer in yesterday's budget. The headline tax collection forecasts are as follows:
Income tax is forecast to grow 30% between 2011-12 and 2017-18.
Corporation tax if forecast to fall despite the fact that economic recovery is anticipated and corporation tax receipts always go up disproportionately in a recovery.
If corporation tax went up by as much as income tax in this period receipts should be at least £56 billion in 2017-18.
They will actually be about £39 billion. That's more than £16 billion given away in that year. The cumulative figure is worse. Just assuming that corporation tax maintained a collection ratio with income tax over this period (and it should improve) the cumulative loss is explained by this table:
Over six years George Osborne is going to give £58 billion to big business - who are already sitting on a cash pile of more than £700 billion. That's cash given to business it does not need, has no use for and will not invest.
And how is this happening? Mainly by making the UK a tax haven and by refusing in future, in the main, to tax any income arising outside the UK in this country. That policy will be costing the UK more than £9 billion a year by 2017.
In the circumstances the claimed tax recovery from tax havens over this period of £1 billion looks very small indeed.
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Good lord. Should my small company clients not be paying corporation tax? I’ve been doing this wrong all these years!
Something that struck me about the budget is the announcement to exempt 450,000 small businesses from National Insurance by introducing an ’employment allowance’, exempting business owners from the first £2000 of employer’s NI. I can see the case for that being a help to new start ups whose owners are currently taking a very little money out of their business and have very low turnovers. But I also recall one of the reasons for the government scrapping the 50% tax rate was the gripe from wealthier ‘entrepreneurs’ that the extra ‘burden’ was preventing them from investing money in their businesses; Richard pointed on TV out to Charlie Mullins, MD of Pimlico Plumbers, that this suggests small business owners such as he are taking money out of their business to maintain their net pay and lifestyle. Proving that we are not all in it together, so much as that most of us are all in the sh*t together so that such as Mullins can keep his head out of it. Now that such ‘entrepreneurs’ are receiving a tax cut, shouldn’t they be able to find that £2000 for employers’ NI from the extra money we are allowing them to keep? Of course not; it would seem only the poorer and poorest of us are expected to live ‘within our means’.
I’m sorry – does Osborne think that somehow the economy is going to grow by 30% over the next five years? And that if it does, that the growth in GDP will lead to growth in wages, allowing people to pay more tax while keeping current rates?
I’m afraid I think that’s complete fantasy. Unless something is done to stimulate growth, the UK economy is going to continue to flatline. Zero growth, constantly dipping in and out of recession – actually, we’ve never been out of recession, it’s just that the rules for declaring that we’re in recession are stricter than those for saying we’re recovering. And even when there is growth, the profits will largely go to the wealthiest, who will gamble it, rather than to employees who might spend it on new goods and services, helping the feedback loop.
Of course, there will be some inflation – which could cause us to meet the numbers, just not at the current value of the pound.
I agree with you – it is complete fantasy – but they’re his numbers – don’t blame me
Will this happen?
Not a hope