London to raise corporate tax to cover Covid-19 deficit

Even after a 19-25% hike, the UK will still have the lowest corporate tax rate of any G7 country, says British budget minister

British Prime Minister Boris Johnson and Chancellor of the Exchequer Rishi Sunak

British Finance Minister Rishi Sunak announced during the presentation of his draft budget an extension of emergency aid programs in the face of the coronavirus crisis plus an upcoming tax hike to start reducing public deficits.

Speaking to Parliament, he announced that the UK economy is expected to return to its pre-crisis level in mid-2022, six months earlier than initially estimated, thanks to its vaccination program against Covid-19.

With the country deep in its third national lockdown, the chancellor of the exchequer made clear in his annual budget that saving jobs during the crisis is his top priority.

He added 65 billion pounds ($90.7 billion) of aid to help companies and citizens make it through the rest of this year and next, taking the government’s total fiscal support to 407 billion pounds.

In a dramatic statement to Parliament, Sunak then sketched out a blueprint to start restoring the U.K.’s battered public finances over the coming years.

At the center of his plan is a politically risky freeze of income tax thresholds, pulling more people into higher tax brackets as earnings rise in future, and an increase in corporation tax to 25% in 2023, from 19% now.

Government spending will help businesses survive the crisis, so Sunak said it is “fair and necessary” to ask them to contribute toward paying back that debt.

“It’s going to take this country – and the whole world – a long time to recover from this extraordinary economic situation,” Sunak told members of Parliament. “Once we are on the way to recovery, we will need to begin fixing the public finances – and I want to be honest today about our plans to do that.”

Sunak predicted that Britain’s gross domestic product will be three percentage points below the level it would have reached without the health crisis in five years.

According to Sunak, new support is also necessary in view of the current restrictions to fight the pandemic.

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