A new forecast from HMRC has highlighted that the proposed cuts of 2% Corporation Tax will now cost the Treasury £6.2 billion in lost revenue.
The government has planned for Corporation Tax to be reduced, bringing it down from 19% to 17%, by the end of the decade.
The promise to cut Corporation Tax was first announced by former Chancellor George Osbourne. In autumn, current Chancellor Philip Hammond confirmed that the government would be going ahead with the promises to reduce the tax.
HMRC recently released figures estimating the boost in revenue the Treasury could get if Corporation Tax was increased by 1%. £2.8bn to £3.1bn would be brought in each year.
Opposition to tax cuts
Opposition to the tax cut is growing because of the potential strain it will place the economy under, especially around Brexit time.
The tax cut appears to be going ahead though, despite the fact that the NHS needs to find another £20bn a year more by 2023-24. A reduction in revenue could put this plan at risk, some are saying.
Former adviser to Osbourne, Rupert Harrison said that it was “hard to see why further cuts to corporation tax are good value”.
Meanwhile, Peter Dowd, shadow chief secretary to the Treasury said:
“Even Osborne’s former adviser knows that further cuts to corporation tax are a bad use of public funds. Philip Hammond should cancel his plans for more corporate giveaways and invest in our public services.”
However, a Treasury spokesperson said: “The strength of our economy means we are expecting to collect more corporation tax in 2020 than forecast one year ago. Low corporation tax supports the economy by enabling companies to reinvest in their business, create jobs and increase wages.”
It could be good news for businesses looking to reduce their tax bill, so it will come as a pleasant surprise for some. However, even without the cut, the UK already has one of the lowest Corporation Tax rates in the developed world.
What do you think of the cut to Corporation Tax? Do you think it will benefit the Treasury in the long-run, or leave the public purse a bit too bare? Please share your thoughts below.