Archive for the ‘Corporate Tax Cut of 2%’ Category

The Biggest Companies in the UK did not need a 2% Tax Rate Cut?

dimanche, avril 22nd, 2012

Richard Murphy of Tax Research UK in his article on why the biggest companies in the UK did not need a 2% (Corporate) tax rate cut, writes that…….Amongst the few items in last month?s budget not, so far, subject to retrospective Tory regret about the incompetence in the thinking behind it, was the 2% cut in the large company corporation tax rate introduced for this current financial year. 1% of this had already been scheduled in earlier budgets, and another 1% was added in March.

He continues that …..There are two points to make about this. The first is the very obvious vote of no confidence that this represents in George Osborne?s economic strategy. Businesses are not investing here because they have no faith in the prospect of economic growth which he said he can deliver, but which they do not believe.

Secondly, and a lot more importantly, when large businesses are sitting on this amount of cash then there is no way on earth that they are short of money to fund any investment that they want to undertake. Far from it, they are awash with the funds needed to invest, but are refusing to undertake it. As a consequence a cut in the corporation tax rate to encourage investment will achieve no such goal. It is not the current tax rate that is stopping big business investing in the UK, it is the lack of confidence big business has in George Osborne that is stopping that.

However, is there not a counter argument here? With the economy not able to rely on the financially, hard-pressed consumer to go on a spending spree and kick-start growth and limited prospects for increased exports to the Euro-zone, large businesses refusing to invest are also contributing to the lack of growth in the economy. A lack of confidence in the growth strategy of the Chancellor is not a sufficient reason for this in a trading nation in a global economy, when traditional export markets are depressed.