By Ricky Browne
A higher tax for corporation along with the introduction of free ports were among the highlights of Chancellor of the Exchequer Rishi Sunak’s budget speech at Parliament today.
The higher corporate tax could help to increase interest in the proposed free ports, where presumably corporation tax could be nil, or at least greatly reduced.
Before Sunak’s speech it was much feared by some that the budget would bring increased taxes particularly for businesses, as the country contemplates its massive pandemic-related debt.
And so it was that UK corporation tax on company profits will increase to 25 percent – but not until 2023.
FEEL GOOD MEASURES
But there were other measures in Sunaks’ 50-minute presentation, that reduced the impact of that, continuing many of the policies that were introduced to tackle the Covid-19 pandemic last year.
The list included: the furlough scheme being extended to September; the stamp duty holiday continuing for a further three months to the end of June; and self-employment grants being extended to September.
In addition, alcohol duties were cancelled. And there will be no fuel duty increase either.
Universal credit increase has been increased for six months and the business rates holiday has been extended.
Sunak also had some good news on growth, as the country tries to recover from the pandemic which it is still currently fighting and the negative growth rate of some 10 percent for 2020.
Sunak said that there would be four percent growth for 2021, followed by an impressive growth rate of 7.3 percent in 2022, before falling back to a more normal growth rate of 1.7 percent in 2024 and 1.6 percent in 2025.
On the face of it, one of the biggest announcement was on corporation tax – going up to 25 percent in 2023.
But that increase to 25 percent is only for corporations with profits above £250,000. Companies that have profits under that level will continue to pay 19 percent.
The corporation tax could earn the state some £18 billion pounds per year. But some commentators believed that the rate would be dropped before any general election.
Kier Starmer was one of those people, and he followed the speech sitting on the bench opposite, preparing for the first time that he would reply to a budget presentation. Prime Minister Boris Johnson sat against a corner on the green benches diagonally opposite Starmer, and some distance from his Chancellor.
The Chancellor ended his presentation by announcing that special economic zones — free ports — are to be utilised at eight locations across the UK. That includes: at East Midlands Airport, Felixstowe and Harwich, the Humber region, the Liverpool City Region, Plymouth, Solent, Thames and Teesside.
The special economic zones with different rules will make it easier and cheaper to do business, the Chancellor said.
Sunak said the eight new freeports would unlock “investment generating jobs”.
He said the free ports will have simpler planning and cheaper customs – with favourable tariffs, VAT or duties. These lower taxes and tax breaks were “to encourage construction, private investment and job creation”, he said.
He added that such free ports were difficult to implement under the EU, and were therefore a benefit of Brexit. That view was contradicted by some commentators, who noted that there were free ports across the EU.
Freeports have been successful across the globe. Some of the more successful include the aptly named town of Freeport in the Bahamas, as well as Singapore, Dubai and various free zones in China, Macau and Hong Kong.
There are also estimated to be about 80 free zones in the EU, including places like Vienna, Austria; Copenhagen, Denmark; Bordeaux in France; Cork and Shannon in Ireland; Venice, Italy; Luxembourg; Malta; Madeira in Portugal; and Barcelona in Spain.
The UK closed its last free ports in 2012. But there is a free port on the Isle of Man and also in Gibraltar as well as Hamilton Harbour in Bermuda.
KIER STARMER REPLIES
Leader of the Opposition Kier Starmer noted that unemployment was currently at five percent, with debt over £2 trillion.
“We got a budget that papers over the cracks rather than rebuilding the foundations,” Starmer said, adding “there are very few silver linings in the is budget.”
And then there came a delicate balancing act, where Labour wants to oppose the Conservatives increasing tax – even though Labour usually looks very favourably on taxation – while at the same time supporting an increase.
“Corporation tax should go up”, Starmer said.
“But no taxes should have been raised in the teeth of this crisis,” he added. “So the council tax raise is astonishing. “
“The proper basis for making tax decisions is the economic cycle, not the electoral cycle,” said Starmer, who noted that the Chancellor probably intended to drop these tax increases before any upcoming general election.
“This is a budget that didn’t even attempt to rebuild the foundations of our economy” he said. “ it’s a quick fix, papering over the cracks.”