The UK is to cut its corporate tax rate from 20% to 18% by 2020; thus lessening Ireland’s advantage in attracting foreign direct investment. The North is also seeking to get a special rate in the next few years of 12.5%, to match Ireland’s.
British chancellor George Osborne included the measure in his latest budget yesterday. Britain’s corporate tax rate will be cut to 19% in 2017 — from its current 20% level — and then to 18% in 2020. Mr Osborne also said he will maintain the pace at which the UK cuts the budget deficit, as he reduced taxes on banks and other businesses while squeezing welfare.
The chancellor pared a levy on banks and introduced a new surcharge on bank profits, while placing limits on tax relief for so-called non-domiciled people living in Britain.
It is the first time Mr Osborne has been able to set out his plans for tax and spending without being constrained by the Liberal Democrats, which lost its share of power after the Conservatives won a surprise parliamentary majority in May’s election. It’s also the first budget by a Tory majority government since 1996.
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“The British economy I report on today is fundamentally stronger than it was five years ago,” Mr Osborne told the House of Commons as he laid out his seventh budget since becoming chancellor in 2010.
Britain’s deficit will be £69.5bn (€96bn) this year, compared with the £75.3bn predicted in March, Mr Osborne said, citing estimates by the Office for Budget Responsibility. The UK economy will increase 2.4% this year and by 2.3% in 2016, according to the Office for Budget Responsibility, compared with March forecasts of 2.5% this year and 2.3% next.
Borrowing will fall to £43.1bn in 2016-17, £24.3bn in 2017-18 and £6.4bn in 2018-19, he said. The UK will be in surplus in 2019-20, a year later than forecast in March.
“This is a budget that can only be delivered because the British people trusted us to finish the job,” he told politicians.
“We should aim for a new settlement across the political spectrum where it is accepted that without sound public finances there is no economic security for working people,” he said.
The levy on banks will be gradually reduced over the next six years, Mr Osborne said, and won’t apply to worldwide balance sheets after that. There will be an 8% surcharge on bank profits starting in January 2016, he said.
The chancellor also said he will stop the arrangement that allows people with non-domiciled status to reduce their tax liabilities from being permanent and disallow people from inheriting the right.
Mr Osborne’s aim is to turn a budget deficit of almost 5% of GDP into a surplus by slashing £25bn from welfare and government departments in an intensification of the austerity drive he began in 2010.
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