Matthew Lynn Matthew Lynn

Rishi Sunak’s tax rise is already backfiring

(Photo: Getty)

It would raise the money needed to fix the health service. It would make sure the burden of paying for Covid fell on the broadest shoulders. And because it would do little more than bring the UK back into line with its major industrial rivals, it wouldn’t even have any impact on our competitiveness. When Rishi Sunak announced the decision to raise Britain’s rate of corporation tax from 19 to 25 per cent back when he was still Chancellor it was sold as a necessary step to restore the public finances, and one that would have a negligible impact on business. But hold on. AstraZeneca said this week that it was planning to build a new plant in Ireland because Britain’s taxes were now hitting it too hard – and it is likely to be far from the last to invest elsewhere.

With Boris Johnson spending money like crazy, and with the costs of the pandemic to grapple with, Sunak may have felt that he had little option but to raise taxes. Corporation tax may well have seemed the most promising target. After all, our rate was significantly lower than France, Germany and the United States. And, in the view of what Liz Truss would probably call ‘the left-wing economic establishment’, the rate done little to improve productivity and growth. ‘The decade-long corporation tax experiment by this government has failed,’ the Labour leader Sir Keir Starmer argued, backing the increase. It was time big business paid a little more, and most would be happy to do so.

And yet it is not playing out like that. Pascal Soriot, the chief executive for AstraZeneca, and an executive who was a hero of this government when he was supplying Covid vaccines at cost, said today that his company was building a new factory in Ireland instead of the UK because tax policies had become punishing in this country.

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Matthew Lynn
Written by
Matthew Lynn
Matthew Lynn is a financial columnist and author of ‘Bust: Greece, The Euro and The Sovereign Debt Crisis’ and ‘The Long Depression: The Slump of 2008 to 2031’

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