Chancellor Rishi Sunak is set to use the upcoming March budget to announce a pathway for increasing corporation tax, it has been reported.
The move will come as a bid to help repair damaged finances in the UK as the coronavirus pandemic continues to wreak havoc on the economy.
The finance minister is not expected to implement the hike immediately but instead increase it by 1 percentage point in the autumn, the Times said, taking it to 23% over the parliament.
Each percentage point rise will raise around £3bn ($4.3bn) according to HMRC modelling, the newspaper said.
However, previous estimates by the Officer for Budget Responsibility (OBR) have suggested that the rise could knock 0.5% off business investment spending. Other business leaders and economists have similarly hit out at speculation that corporation tax could rise.
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Adam Marshall, the director-general of the British Chambers of Commerce, said last month: “Signals matter. Coming out of the worst economic crisis in a generation, we should be signalling that we want a positive and favourable environment for business in the UK. The time now is to demonstrate that we are open for business. Far better to signal no immediate tax rises at all.”
In recent years, corporation tax in Britain has fallen from 28% a decade ago to 19%. It is currently the lowest rate in the G7, even after the Conservative government cancelled a planned cut to 17% after the election in 2019.
It comes as Britain is on course to borrow a record £400bn this year. The COVID-19 pandemic has forced the government to borrow sums not seen in peace time.
The cash has gone towards protecting businesses, supporting jobs, and bolstering the NHS and public health response to the virus.
On Friday it was revealed that the UK government borrowed another £8.8bn last month. Although, this was much less than economists were expecting.
Data published by the Office for National Statistics (ONS) showed public sector net borrowing stood at £8.8bn in January. Economists had forecast borrowing of £25bn.
While the monthly figure was below forecasts, the UK's national debt still stands at £2.1tn. The ONS said debt as a percentage of GDP hasn't been this consistently high since the 1960s.
The government spent £81.9bn on day-to-day activities in January, including £5.1bn on COVID-19-linked job schemes. State spending was £19.7bn higher than January 2020.
The UK has so far borrowed £270.6bn in the first 10 months of its current financial year, £222bn more than in the same period last year. It marks the highest public sector borrowing in any April to January period since records began in 1993.
“It’s right that once our economy begins to recover, we should look to return the public finances to a more sustainable footing and I’ll always be honest with the British people about how we will do this," Sunak said in a statement on Friday.
The chancellor is set to deliver his annual budget on 3 March.
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