Business leaders warn Tory candidates against focus on corporate tax cuts
Business leaders have warned future leaders of the Conservative Party against headlines about corporate tax cuts without a longer-term plan to grow and support investment in the UK.
MPs such as Liz Truss and Nadhim Zahawi, who are vying to become the next prime minister, have put tax cuts at the center of their arguments, including reversing the proposed rise in corporation tax. Some have also called for a reform of professional tariffs and a reduction in national insurance costs.
Businesses, however, are skeptical of the need for an immediate corporate tax cut, arguing that it is a tax levied on profits at a time when many businesses are facing recession.
“A lot of businesses would see no benefit from corporation tax cuts because they’re not making money,” said Stephen Phipson, head of Make UK, which represents manufacturing in the UK.
Claire Walker, co-executive director of the UK Chambers of Commerce, said: “Businesses are not interested in headlines; they want realistic levels of tax cuts and while a reduction in corporate tax would be welcomed by businesses, the immediate need is still great.
She underscored the need to cut value added tax on energy bills and reverse the National Insurance hike, adding: “Talking about a 15% headline corporate tax rate could place the UK in breach of new international agreements as the effective rate would. be below [that] once allowances and deductions have been taken into account.
Kate Nicholls, head of UKHospitality, which represents many high street businesses, said: ‘You have to make a profit before you pay corporation tax and for many businesses in the sector the question now is viability at the day by day in the face of soaring prices. energy costs, food bills and labor shortages. . . we want to see urgent action here first and foremost to make sure we have the right conditions for growth.
There were also concerns about the speculative nature of the Tory MPs’ proposals, as they outlined policies interpreted as aimed at winning leadership rather than protecting Britain’s economy from a downturn.
A business leader has dismissed some candidates’ political proposals as “a fantastic economy”.
Phipson said companies were much more concerned with cutting the costs of doing business in an era of runaway inflation, which included business tariffs, VAT and national insurance.
Employers’ organization CBI is due to release a “plan for growth” on Wednesday which will also call for reform of business rates and new investment incentives as part of a package of support measures.
Craig Beaumont, head of external affairs at the Federation of Small Businesses, said a corporate tax cut was not even among the top five demands of small businesses and start-ups.
He said the government should reconsider the broader business tax package, adding: “There is an opportunity to cut VAT, cut fuel taxes and help with energy bills, as well than to proceed with the long-awaited reform of corporate rates.”
A business executive said, “There is no business in the world that makes investment decisions based on overall corporate tax. It’s the other taxes that need to be fixed urgently, but every candidate needs a credible, costed plan and [to] demonstrate that this will not lead to inflation.
Many industry leaders also worry that headline-grabbing tax cuts have trumped tougher policies aimed at spurring growth and tackling rising prices.
“Where is the long term plan for the UK?” Phipson asked. “So far these are just sound bites, but this is just the beginning. Businesses want to know why they should invest in the UK.
Candidates viewed most favorably by business leaders so far include former Chancellor Rishi Sunak, who has built strong relationships with many businesses during the pandemic, and his successor Nadhim Zahawi, who is seen as sympathetic. to the industry given his business experience.