Business Tax Causes Conflict Between Parties

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Prominent figures from the Labour and Conservative parties have clashed over the issue of business tax. While speaking at the annual conference of the British Chambers of Commerce, Tory Michael Gove and Labour’s Ed Balls exchanged heated opinions over the UK’s best options for the future of business tax.

Labour’s intention if elected is to reverse corporation tax cuts, and replace them with a reduction in the business rates that apply to smaller firms. Gove said that such a move would “set business against business.” The education secretary also claimed that it would threaten the UK’s economic recovery.

Corporation tax has been steadily reduced by the current coalition government since 2010. From 28%, it has descended to just 21%. Labour have not expressed any intention to reverse those cuts that have already taken place, but would reverse a further cut that is planned to take place next year and would bring the level down to 20%.

Ed Balls, however, defended Labour’s plans. The Labour party holds that the best move would be keeping corporation tax at 21% and cutting business rates for small firms instead. Business rates for premises with a rental value of less than £50,000 annually would also be frozen for a period of two years. Labour claims this move is prioritising small firms such as shops and pubs, rather than bigger companies that stand to get the greatest benefit from further corporation tax cuts.

At the conference where he exchanged words with Gove, Balls himself said on the subject: “We do not think we can justify another tax cut for large businesses in 2015, when so many small and medium sized business are under such pressure.”

Balls also pointed out that, before the current government took power, corporation tax was already being cut by the labour party. During Labour’s time in government, it was reduced from 33% down to the 28% level that was in effect when the coalition took over.

However, Gove accused Labour of “[attacking] business” and said the move would “threaten investment, threaten jobs and threaten the recovery.” He conceded that the move would benefit valuable smaller firms, but said that doing so at the expense of bigger jobs would set businesses against one another.

Gove went on to say: “It’s gesture politics driven by short-term political positioning, not the long-term good of our country. And it would set back the economic recovery, which is creating jobs for young people.”

It is worth noting that the conservative party has also formed policies to support small businesses through business rates, albeit to a significantly lesser extent than Labour have promised. George Osborne has promised to put a 2% cap on future increases. The Chancellor has also promised 100% rate relief until March for premises with less than £6,000 rateable value, along with a discount of £1,000 for those valued under £50,000.

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