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Labor would support a gradual increase in corporate tax in this parliament, the shadow chancellor said after a week of criticism over the party’s claim that tax increases should be scrapped.
Writing for The Guardian, Anneliese Dodds says the Labor Party would not support an immediate increase in taxes on company profits in Wednesday’s budget, but was open-minded about future increases. Rishi Sunak, the chancellor, is believed to be preparing to increase corporate tax from 19% to 25% by the end of parliament in 2024.
Dodds also said the party would support reforms to reduce corporate tax loopholes. But he accused the chancellor of playing politics with early tax increases, which he reportedly boasted that he would cut later in parliament as a pre-election sweetener.
The Guardian also understands that Labor would not automatically object to freezing the income tax threshold, which Sunak is said to plan to freeze at £ 12,500 for base rate taxpayers and £ 50,000 for the highest rate for at least three years. . “When the Conservatives have increased the personal allowance in the past, it has helped the better off more than others,” said a Labor source.
Last week, Keir Starmer, the Labor leader, faced a backlash after saying he would oppose any new corporate tax in this week’s budget, including in private from some shadow cabinet ministers, who urged a a more nuanced position.
On Monday night, Richard Burgon, the former shadow cabinet minister who has become one of Starmer’s key critics on the party’s left, said Labor must step up its attacks on the Conservatives, calling the party position on corporate tax as a “debacle”.
At the rally organized by the Labor Assembly Against Austerity, with Labor MPs and trade union secretaries general, Burgon said: “We cannot just avoid big debates when they happen. The fiscal debacle of the last few days shows that if we continue to do so, then our party will be flanked by the conservatives with their false rhetoric of leveling up. We can win the case for a progressive tax system, but only if we do. “
As Starmer told the Commons that “now is not the time to increase taxes on families and businesses,” a shadow cabinet source said that talks had been made to the party leader to soften the approach. The more nuanced proposal was a relief, they said. “The approach never seemed final and I think more inexperienced people participated in a tough briefing about it,” the source said.
Dodds had been more reluctant to endorse any future tax increases in a video speech delivered by Bloomberg on Monday. “Now is not the time for immediate tax increases,” he said. “We have made it very clear that at this time the chancellor should focus on promoting jobs, on ensuring that businesses can continue to function, on getting people who are unemployed back to work quickly.”
Sources close to Dodds defended his opposition to immediate tax increases, with one saying it was the blanket Keynesian ban against increases when the economy heads into a recession. “We’ve never been against corporate tax increases, it’s about what is the right time in the middle of a recession,” said a Labor source.
In his article, Dodds said it was “difficult to find a serious economist who believed that immediate tax increases would do more than harm Britain’s recovery.” However, he admitted that there was an argument in favor of increasing corporate tax. “There is a clear long-term case for increases in the corporate tax rate, as well as action against loopholes, where the Conservatives have made us an international outlier for a decade,” he wrote.
“If there were a sensible plan to raise the rate in this parliament, of course, the Labor Party would look into it carefully, but now is not the time for immediate tax increases.”
However, he said the party was suspicious of Sunak’s motivations. “He has reportedly been telling Tory MPs that if he raises taxes now, he can cut them again in time for the next election. Instead of doing what is best for the country, he is doing what he thinks will benefit his party in 2024, “he said.
Dodds will argue that key measures expected in Sunak’s budget, such as the extension of the license scheme, holidays in commercial rates and VAT cuts, are “manipulating the edges” and could have been announced weeks ago.
He also hopes to bring home the narrative that the economic downturn is due to the mismanagement of the last decade by the Conservative government, with the foundations of the economy “fundamentally weakened over the last decade … exposed by this crisis.”
Dodds said the budget would leave many people out in the cold, particularly those excluded from pandemic support, while welfare residents were exposed in the first months of the crisis.
“Millions of people have fallen through the huge holes they cut in the social safety net,” he said. “After a decade of neglect and broken promises on social care, a generation of older people was exposed to the virus in a system that has become a national disgrace. The tragic consequences were totally avoidable. “
Dodds also said the chancellor should offer help to companies that are “deeply concerned about the amount of debt they have had to take on over the last year.” He said fear of loan repayments would mean that companies would not invest or hire new staff.
Much of Sunak’s budget is expected to form a rescue package to stabilize the economy during what the government expects to be the final months of the worst period of the pandemic.
The Treasury will announce a series of fiscal consultations on March 23, which some have described as a ploy to allow the chancellor to announce the “good news” about budget day extensions of support and delay decisions on tax increases until the end. of year. The capital gains tax appears to be an area in the spotlight for a sizable increase, which could align with the income tax.
