The TaxPayers’ Alliance dynamic tax model suggests the planned 6% increase in corporation tax from the current rate of 19% to 25% could cost £30.2 billion of lost GDP after a decade. Investment would be £11.9 billion higher after ten years if the rise was cancelled, highlighted by AstraZeneca’s announcement of a new manufacturing plant in low-tax Ireland rather than the UK.
The founder of the Conservative Growth Group of MPs, Ranil Jayawardena, says the modelling shows that scrapping the rise would “create jobs, encourage investment and help pay for itself.” Even more surprising are reports that former chancellors George Osborne, Philip Hammond and Kwasi Kwarteng all think the hike proposed for a little over a month’s time is a mistake.
Ahead of Jeremy Hunt’s first Spring Budget on March 15, the three former chancellors have separately chimed in. Hammond told the Telegraph “My view on corporation tax is always that it’s better to have lower than higher. I am quite disappointed that we will be increasing it to 25%.”
George Osborne highlighted the AstraZeneca decision when he told the BBC:
“The reason I reduced business taxes was to attract investment and attract research and attract companies like AstraZeneca, and if you put up taxes then you will potentially have the opposite effect. I reduced business tax because I thought that was a way of bringing investment in. That creates the revenues that allow you to fund your public services. That’s the approach I took and would be the approach I would take again.”
Kwasi Kwarteng says increasing corporation tax “doesn’t help our competitiveness”, adding: “We have got to look at ways to improve our attractiveness to foreign investors.”
The OBR’s forecast coming in as out by £30 billion versus the real world data released last week means there is room to reverse the corporation tax hike. Sunak and Hunt have no mandate to raise taxes and they are being rhetorically outflanked by Labour on tax-cutting. A ridiculous situation for Conservatives who claim to be low tax Tories…