FD Capital, the UK’s leading financial recruitment agency, calls on the Government to cut personal and corporate taxes in their March budget and criticises the increases in Corporation tax.
The agency is calling on the government to urgently chart a path back to 19% and below before further damage can be caused to the country’s economic prospects.
FD Capital proposes that the government can reduce corporation tax to 19% as part of the March 2023 budget by slashing government spending and reducing the civil service headcount, two measures that have already been proposed by the government ahead of this year’s general election.
Corporation tax is the type of tax with the most harmful economic outcome. It’s usually the company’s employees and the wider public that deal with the burden of the tax. Slashing corporation tax benefits every aspect of the economy, from increasing salaries to encouraging new investment from international partners.
The government had successfully brought down corporation tax from 28% to 20% before it was further reduced to 19% in 2018. Rishi Sunak, in his then role as chancellor, announced that the main corporation tax rate would jump to 25% from April 2023. This increase was initially explained as being a consequence of revenue lost incurred by the government during the pandemic. Liz Truss proposed a cancellation of the corporate tax increase during her short term in office. Jeremy Hunt, as Chancellor under Rishi Sunak, implemented the planned increase in 2023.
It’s a misconception that corporations are at the forefront of the economic harm caused by higher corporation rates. Recent research and literature agree that the burden of this harm is split between corporation owners and low-wage workers.
The UK’s post-Brexit prosperity relies on its ability to present itself as one of the best places in the world to do business. However, the UK’s corporation tax is not globally competitive – especially with the Republic of Ireland having a lower corporation tax rate of 12.5%, just across the Irish Sea.
Corporation tax cuts can be funded by reducing the civil service headcount to its pre-pandemic and pre-Brexit levels. The civil service has steadily grown year on year since 2016, with an estimated headcount of 488,000 in June 2023.
FD Capital proposes that cutting corporation tax to 19% would promote economic rejuvenation by making the UK globally competitive to boost economic growth by improving business confidence and encouraging new investments.
