Due to COVID-19 Financial Struggles... UK Conservative Government Moves to Raise Corporate Tax

Rishi Sunak UK Chancellor to Announce Corporate Tax Increase Plan on November 3
Corporate Tax to Gradually Rise from Current 19% to 23% Starting This Fall

Rishi Sunak, UK Chancellor of the Exchequer [Photo by Reuters]

[Asia Economy Reporter Park Byung-hee] As countries around the world implement aggressive fiscal policies in response to COVID-19, the United Kingdom is planning to raise corporate taxes to alleviate the increased fiscal burden. This move is expected to face opposition as the government shifts the financial burden onto companies.

According to the UK Sunday Times on the 21st (local time), Rishi Sunak, the UK Chancellor of the Exchequer, is scheduled to unveil a plan to raise corporate taxes on the 3rd of next month.

Chancellor Sunak is expected to announce a plan to gradually increase the corporate tax rate from the current 19% by 1 percentage point this fall, eventually raising it to a maximum of 23% by the next general election. The Times reported that the corporate tax hike is expected to increase the UK government's annual tax revenue by ?12 billion (approximately 18.6 trillion KRW).

Due to COVID-19, the UK government debt has been increasing at the fastest pace in history. From April last year, when the current fiscal year began, to January this year, the UK government increased its debt by ?270.6 billion. As a result, the UK's total national debt has now exceeded ?2 trillion (approximately 3,099 trillion KRW).

Given the economic contraction caused by COVID-19, significant corporate opposition is anticipated. If the corporate tax rate is raised by 1 percentage point this fall, corporate tax burdens are expected to increase by ?3 billion immediately.

Following the decision to leave the European Union (Brexit), the UK economy has suffered a greater blow from the COVID-19 crisis than during the global financial crisis. Last year, the UK's gross domestic product (GDP) shrank by 10%, marking the worst performance in 300 years. The Bank of England (BOE) forecasts that GDP will contract by 4% year-on-year in the first quarter of this year as well.

Chancellor Sunak is expected to emphasize that a long-term increase in corporate taxes is inevitable.

The UK think tank, the Institute for Fiscal Studies (IFS), analyzed that a significant corporate tax hike is unavoidable due to Brexit, COVID-19, and global warming. The UK government aims to complete vaccination for all adults by the end of July. In the long term, it must also achieve net-zero greenhouse gas emissions by 2050. Additionally, the IFS pointed out that increased fiscal spending due to an aging population must be considered.

The corporate tax increase under Boris Johnson's cabinet is notable for differing from the crisis management approach of former Conservative Prime Minister David Cameron. Cameron, who took office in May 2010, aimed for a smaller government by reducing government spending to overcome the global financial crisis at that time.

With the corporate tax hike underway, current economic support measures such as value-added tax (VAT) reductions and corporate loan support are expected to be extended at least until August. These measures were originally scheduled to end next month.

This content was produced with the assistance of AI translation services.