UK government announces plans to retain corporation tax hike
International Business News – Following the abandonment of plans to abolish the top rate of income tax on October 3, the British government made another major policy adjustment on October 14 under continued pressure. British Prime Minister Elizabeth Truss announced the same day that it will retain the company tax increase plan announced by the previous government, a move that will bring the government 18 billion pounds (1 pound about 1.118 U.S. dollars) of revenue each year.
Truss attended a press conference on October 14, said that the massive tax cuts announced by the British government in September exceeded market expectations in terms of scale and speed, and the current government must strengthen fiscal discipline to appease the market. The British government will take the necessary measures to ensure that the medium-term debt decline, but the growth rate of public spending will be slower than previously planned.
Truss said that low taxes, high wages and high growth of the British economy remains the goal of her administration, and her focus is to safeguard the stability of the British economy. The new Chancellor of the Exchequer, Jeremy Hunt, will announce his medium-term fiscal plan at the end of this month and continue to promote the government’s previously announced energy price protection measures for households and businesses.
The U.K. government announced in early 2021 that the tax rate for lucrative large corporations will increase from 19% to 25% from April 2023, the first corporate tax increase in the U.K. since 1974. In September, the UK government announced massive tax cuts, including the abolition of the corporation tax hike scheme to encourage investment.
The UK’s large-scale tax cuts triggered financial market shocks, and the pound to dollar exchange rate once hit a record low. In the face of dramatic market volatility and external questions, the British Treasury announced on the 3rd of this month, abandoned the previously proposed plan to cancel the 45% top income tax rate. on October 10, the Treasury announced that the medium-term financial plan and other information will be published from November 23rd to October 31st.
To stabilize the bond market, the Bank of England announced on September 28 to October 14 temporary purchase of long-term British government bonds. 10 October, the Bank of England announced an increase in the daily debt purchase size ceiling. 11, the Bank of England again upgraded measures to include inflation-linked Treasury bonds into the bond purchase program. However, there are concerns that the debt market chaos will continue after the central bank’s intervention measures end on the 14th.
British think tank Resolution Foundation CEO Torsten Bell said that the initial size of 45 billion pounds of tax cuts so far nearly half have been canceled, but the remaining tax cuts and the increasingly sluggish economic outlook will still create problems for government financing. The recent market turmoil shows that economic policy-making is not a game.