Increase in corporation tax. Unintended consequences.
Posted: March 6th, 2021, 8:30 am
The budget announcement on a rise in corporation tax appears to fly in the face of previous noises regarding lowering the tax. Mainly becoming a more attractive for companies, increased investment and overall more actual tax brought in.
I know this rise is kicked down the road a bit and lots of water can flow under the bridge by then but how true are some of the claims. The tax did appear to be bringing more money in over the years at the lower rates. Although, as its percentage based if the economy does better then tax take will rise. Would it have been even higher? Had the rate not dropped.
I can see that less tax means more available to potentially invest (or up my dividend) Again any evidence in support of this.
Now onto Unintended consequences. The accounting and tax departments tend to find many legal ways to reduce the overall tax bills and I suspect that this will be give a greater focus in future planning.
Will debt now be increased because it can reduce the tax bill and we end up with distorted companies. It looks like shareholders and the public might both lose out.
I'm sure there are other aspects I've not thought of or taken account of, super deduction or politics. Being seen to do something or steal a position to force the opposition into a different corner.
I have looked at some of my own share holdings and the actual tax had increased so maybe its true. Debenhams or several other companies I could name are unlikely to be paying more or even any at whatever rate is announced.
Views welcome
I know this rise is kicked down the road a bit and lots of water can flow under the bridge by then but how true are some of the claims. The tax did appear to be bringing more money in over the years at the lower rates. Although, as its percentage based if the economy does better then tax take will rise. Would it have been even higher? Had the rate not dropped.
I can see that less tax means more available to potentially invest (or up my dividend) Again any evidence in support of this.
Now onto Unintended consequences. The accounting and tax departments tend to find many legal ways to reduce the overall tax bills and I suspect that this will be give a greater focus in future planning.
Will debt now be increased because it can reduce the tax bill and we end up with distorted companies. It looks like shareholders and the public might both lose out.
I'm sure there are other aspects I've not thought of or taken account of, super deduction or politics. Being seen to do something or steal a position to force the opposition into a different corner.
I have looked at some of my own share holdings and the actual tax had increased so maybe its true. Debenhams or several other companies I could name are unlikely to be paying more or even any at whatever rate is announced.
Views welcome