Corporation tax hikes are apparently back on the agenda for the March Budget, with the Financial Timessuggesting that the Chancellor believes it would be fair to ask businesses for more after taxpayer support during pandemic. This argument might score a few points with focus groups and play well on social media, but it is still poor economics.
For a start, there is no immediate need for tax rises of any kind. The UK economy has held up better than expected over the last few months and the early rollout of the Covid vaccines should contribute to a strong recovery from the third nationwide lockdown. This in turn will do far more good for the public finances than any fiddling with tax rates.
Government borrowing will fall sharply as the economy rebounds. In the meantime, the increase in debt is cheap and easy to finance, and the financial markets…
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