UK cuts com­pany tax, tar­gets sugar as growth slows

The Pak Banker - - 6BUSINESS -

Chan­cel­lor of the Ex­che­quer Ge­orge Os­borne an­nounced a fur­ther cut in the main rate of com­pany tax and put a levy on sug­ary drinks as he warned the U.K. econ­omy will grow less quickly in each of the next five years than pre­vi­ously fore­cast. In his an­nual bud­get speech to the House of Com­mons, Os­borne said cor­po­ra­tion tax will be low­ered to 17 per­cent by 2020 from 20 per­cent now. He also set out higher thresh­olds for busi­ness rates for small com­pa­nies, seek­ing to em­pha­size his Con­ser­va­tive Party's im­age as cham­pion of en­ter­prise, while tight­en­ing loop­holes that al­low cor­po­ra­tions op­er­at­ing in many coun­tries to min­i­mize their U.K. tax bills.

"This is a Bud­get which gets rid of loop­holes for multi­na­tion­als and gets rid of tax for small busi­nesses," Os­borne told law­mak­ers in Lon­don on Wed­nes­day. "A 7 bil­lion-pound tax cut for our na­tion of shop­keep­ers. A tax sys­tem that says to the world: We're open for busi­ness. This is a govern­ment that's on your side."

The ex­pected 2 per­cent eco­nomic growth this year, as cal­cu­lated by the Of­fice for Bud­get Re­spon­si­bil­ity, com­pares with a pre­dic­tion of 2.4 per­cent in Novem­ber. The econ­omy will grow by 2.2 per­cent in 2017 and 2.1 per­cent in 2018, com­pared with the 2.5 per­cent and 2.4 per­cent seen four months ago, he said, while ar­gu­ing that his ste­ward­ship for the past six years has put Bri­tain in a good po­si­tion to deal with global head­winds. The fore­casts by the OBR are "pred­i­cated on Bri­tain re­main­ing in the Euro­pean Union," Os­borne said, as he made a di­rect ap­peal to vot­ers to keep the U.K. in the 28-na­tion bloc in the June 23 ref­er­en­dum. The coun­try faces "a dan­ger­ous cock­tail of risks but one that Bri­tain is well pre­pared to han­dle if we act now," the chan­cel­lor said. "We can choose to add to the risk and un­cer­tainty or we can choose to be a force for sta­bil­ity. Bri­tain can choose short-term fixes and more stim­u­lus or lead the world with long-term so­lu­tions to long-term prob­lems."

The fi­nance min­is­ter was seek­ing to strike a bal­ance be­tween spend­ing cuts and sweet­en­ers to re­as­sure the elec­torate and mem­bers of the Tory party as the di­vi­sive EU ref­er­en­dum ap­proaches. The de­te­ri­o­rat­ing growth prospects and lower-than-fore­cast tax rev­enues have lim­ited his op­tions, but he was able to an­nounce an in­crease in the start­ing point for the higher 40 per­cent rate of in­come tax to 45,000 pounds ($63,300) a year in 2017-18, com­pared with the cur­rent level of 42,385 pounds. He also took more peo­ple out of pay­ing tax al­to­gether by rais­ing the per­sonal tax-free al­lowance to 11,500 pounds from 11,000 pounds. He also froze duty on gaso­line, known as petrol in the U.K., af­ter spec­u­la­tion be­fore his speech that he would in­crease it to cap­i­tal­ize on lower retail prices. In fur­ther pop­ulist moves, he froze the du­ties of beer and cider and in­creased the al­lowance for tax-free In­di­vid­ual Sav­ing Ac­counts to 20,000 pounds.

The bud­get deficit in the year 201516 will be 72.2 bil­lion pounds, com­pared with a fore­cast in Novem­ber of 73.5 bil­lion pounds, Os­borne said. It will then be higher than pre­dicted at 55.5 bil­lion pounds in 2016-17 and 38.8 bil­lion pounds in 2017-18, he said, cit­ing the OBR. Os­borne said Bri­tain will have a sur­plus of 10.4 bil­lion pounds in 201920, com­pared with a pre­vi­ous fore­cast of 10.1 bil­lion pounds, meet­ing a com­mit­ment, now en­shrined in law, that he would de­liver one by 2020 -- the first since 2001.

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