Labour Planning Largest UK Tax Burden Since 1940s: IEA
Thursday, May 18, 2017
The plans from Labour, the largest opposition party in the UK, to raise taxes would establish the highest tax burden since the 1940s, says the Institute of Economic Affairs (IEA).
The party said that from next tax year it would increase the headline rate of corporation tax from 19 percent to 21 percent, to 24 percent in 2019-20, and to 26 percent in 2020-21.
Labour said it would also introduce an "excessive pay" tax for companies and lower the threshold for the upper 45 percent income tax rate to GBP80,000 (USD104,183) from GBP150,000. The party has ruled out an increase to value-added tax.
IEA Chief Economist Julian Jessop said: "Such high rates of taxation will disincentivize work, discourage investment, and reduce innovation, making it unlikely that Labour's targeted GBP48.6bn would actually be raised."
"Imposing higher levels of taxation on business goes against the current global trend, with more and more countries now cutting corporation tax.
"This sends a confused message as the UK prepares for Brexit. And imposing an additional tax to discourage 'excessive salaries' presumes that the state knows best and will put off the talented and highly skilled from coming to work in the UK."
Meanwhile, Adam Marshall, Director General of the British Chambers of Commerce, said: "While Labour are making some specific and targeted propositions that could boost the growth prospects of small- and medium-sized firms, these will be largely eclipsed by their proposals for higher personal and business taxes in the eyes of business leaders around the UK."
Labour is lagging behind in opinion polls against the ruling Conservative Party, which is expected to win the snap election scheduled for June 8.