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Chancellor Rishi Sunak is reportedly considering raising corporation tax in the March Budget, in an attempt to offset some of the cost of the UK’s Covid-19 response.
The chancellor is also expected to extend the furlough scheme and Covid-19 business loan programme.
A senior government source told the Sunday Times that the chancellor is exploring raising corporation tax if the UK’s Covid-19 vaccine rollout remains on its projected schedule.
The UK government has spent £280bn on its pandemic response so far. The Office for Budget Responsibility is predicting a £394bn Budget deficit this fiscal year, seven times greater than the 2019-20 figure.
Response to a potential hike in corporation tax has been mixed.
Institute of Economic Affairs director general Mark Littlewood described such an increase as “illogical and counterproductive”, while progressive think tank, the Institute for Public Policy Research (IPPR) was more supportive of such a move.
IPPR executive director Carys Roberts said:
“A corporation tax rise would be a fair way to help stabilise the public finances after the Covid-19 recession has passed, raising significant tax revenue from business profits and not targeting firms that have struggled during the pandemic.”