Conservative rebels are preparing to unite with Labour MPs to block a proposed hike in corporation tax from 19 per cent to 25 per cent, according to reports.
Chancellor Rishi Sunak has laid down plans to introduce a “pathway” for hiking corporation tax over the next few months, as he prepares to announce his spring Budget on Wednesday next week.
Sunak was widely believed to be pushing up the tax rate to 23 per cent, however he is now understood to be mulling a corporation tax rise to as much as 25 per cent, the Times reported.
The increase will help pay off the government’s £280bn of Covid-19 spending, which has yielded a Budget deficit of around £350bn for the year — the highest proportional spending since World War II.
Each percentage increase of corporation tax is expected to raise an additional £3bn in tax revenues.
Janet Yellen, Sunak’s US counterpart, said recently that corporation tax in the US will likely rise from 21 per cent to 28 per cent. It means UK corporation tax would still be the lowest in the G7 if Sunak implemented the hefty increase.
But the proposals have whipped up furious backlash among Tory MPs who are preparing to block the move when it goes to a vote in Parliament. David Davis, a former Brexit secretary, said he will vote against the Budget if it includes significant tax rises.
Labour leader Sir Keir Starmer warned yesterday that there should be no tax rises as Britain attempts to recover from its worst economic output for 300 years during the pandemic.
“Now is not the time for tax rises on families and businesses”, Starmer told Prime Minister’s Questions (PMQs) yesterday.
Labour has argued that any potential tax rises and Budget consolidation should be put off until the UK is well on its way to economic recovery.
Next week’s Budget is also expected to include extensions to a raft of emergency Covid support, including the furlough scheme, VAT cut for hospitality and retail and a business rates holiday.
The chancellor is also muling a six-month extension to the £20-a-week uplift to Universal Credit, according to the Telegraph.