Rishi Sunak is right to put up company taxes – but not until next year

Editorial: The debate about raising corporation tax is about timing rather than the principle

Rishi Sunak should not take risks with growth in Wednesday’s Budget (REUTERS)

The great pre-Budget debate is less of an argument than it appears. Both the Conservative and Labour parties seem divided over the question of raising taxes on company profits, but in fact the dispute is more about timing than the principle.

As our exclusive Savanta ComRes opinion poll today suggests, increasing corporation tax is a popular policy, and there is widespread acceptance that taxes will have to rise. The question, though, is when the rate of corporation tax should go up. Keir Starmer, the Labour leader, and Anneliese Dodds, the shadow chancellor, say they are opposed to an “immediate” rise in corporation tax. We may not know what Rishi Sunak proposes until he delivers his Budget speech on Wednesday, but the speculation is that the chancellor intends to announce rises in corporation tax to come, probably starting next year.

It is possible that Mr Sunak will make a start this year, raising the rate of corporation tax from the current 19 per cent to 20 per cent – and offsetting that small increase with more generous reliefs for businesses suffering from the coronavirus restrictions. If so, that will set up a political battle out of all proportion to the economic significance of the change.