Britain will raise corporation tax to 25 per cent from 19 per cent from 2023 to help pay for the cost of the Covid crisis but tempered the tax rise with a “super deduction” to spur investment, finance minister Rishi Sunak said on Wednesday.
“The government is providing businesses with over £100 billion of support to get through this pandemic so it is fair and necessary to ask them to contribute to our recovery,” Sunak told parliament. “Even after this change, the United Kingdom will still have the lowest corporation tax rate in the G7,” Sunak said.
Sunak said he would encourage businesses to invest their cash reserves with a so-called “super deduction” to reduce their tax bill by 130 per cent of the cost.
He said that under existing rules, a construction firm buying 10 million pounds of new equipment could reduce their taxable income in the year they invest by 2.6 million pounds but with the “super deduction” they could reduce it by 13 million pounds.
“We’ve never tried this before in our country,” Sunak said. Sunak quoted the Office for Budget Responsibility as saying it would boost investment by 10 per cent; around £20 billion higher per year.
“It makes our tax regime for business investment truly world-leading, lifting us from 30th in the OECD, to 1st,” he said.
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