Business Tax Increases Must End: UK Industry Group

By Alexander Zhang
Alexander Zhang
Alexander Zhang
September 13, 2021 Updated: September 13, 2021

A leading British industry group has urged the government to reward companies that continue investing instead of raising business taxes further.

Tony Danker, director-general of the Confederation of British Industry (CBI), said on Monday that UK businesses are willing to pay their fair share to help the country recover from the CCP (Chinese Communist Party) virus pandemic, but are worried that the government would keep turning to business taxes as a politically convenient option.

Chancellor of the Exchequer Rishi Sunak announced on March 3 that corporation tax will be raised to 25 percent from 19 percent from 2023.

According to the Office for Budget Responsibility (OBR), the tax rises will increase the tax burden to 35 percent of GDP in 2025/26, its highest level since the late 1960s.

“After the pandemic, we in business believe that we should pay our fair share to tackle the debts of COVID. That is why many business leaders accepted the jaw-dropping six-point corporate tax increase announced in March,” Danke said in a speech at the Alliance Manchester Business School.

“But there is a real risk now that the government will keep turning to business taxes to carry the load,” he warned.

On Sept. 7, Prime Minister Boris Johnson announced a new UK-wide 1.25 percent health and social care levy, which is based on National Insurance contributions.

Johnson said the £12 billion ($17 billion) tax hike was needed to reform social care funding and to help the National Health Service clear the backlog caused by the pandemic.

The CBI’s Danker said he was “deeply worried the government thinks that taxing business—perhaps more politically palatable—is without consequence to growth.”

The industry group said “the time for further business tax increases must end” and the government must reward those firms who invest.

In reaction to the CBI’s statement, the Treasury said it had supported British businesses during the pandemic through its Plan for Jobs, which cost £400 billion ($554 billion).

“The impact of the pandemic means we have had to make the tough but responsible decision to raise taxes, we’ve asked both individuals and businesses to pay a bit more as we get our public finances back on a sustainable path,” said a spokesperson.

The Conservative government’s latest tax hike went against a pledge Johnson personally made in the Conservative Party’s election manifesto in 2019, in which he promised not to raise income tax, VAT, or National Insurance.

A YouGov survey last week found that backing for the Tories had fallen by five points to 33 percent following the announcement. The dip saw Labour take the lead on 35 percent—the first time the party has been out in front since January.

PA contributed to this report.