Although the government has stated that cuts in corporation tax will ultimately increase revenue, HMRC has argued that it could actually cost the public around £6.2 billion a year.
In a policy proposed in 2015 by former Member of Parliament George Osbourne, taxes on company profits are set to fall by two per cent. Currently, corporation tax in the UK stands at 19 per cent – which is already one of the lowest globally. This has gradually fallen since 1979 when corporation tax stood at 52 per cent.
There have been steep cuts to budgets for councils and departments, a £20 billion NHS spending shortfall, and a freeze on benefits for the fourth year in a row which has led to high levels of poverty among workers. This perfect storm of issues has brought about this drastic proposed change.
The government argues that a decrease in corporation tax will make the UK a more attractive country for new companies to base themselves while also giving those pre-existing companies more money to invest in UK capital. There is currently no evidence of this being the case, however.
According to Ministers, corporation tax is funding public services better than it ever has done in the past, bringing in £56.2 billion last year – although cause and effect appears to have been implied rather than proven between the lowering of corporation tax and the rising of receipts.
Helen Miller, Deputy Director at the Institute for Fiscal Studies disagrees, stating: “Changes to corporate tax have represented some of the largest giveaways in both parliaments since 2010.”