Companies that invest in new equipment or new technologies for two years will benefit from a waiver equivalent to 130% of their initial investment.
It was unveiled last week, Rishi Sunak’s budget has been marked by massive corporate tax hikes, from 19% to 25%.. This marks a historic turning point, because this tax has never stopped falling since the end of the 1970s and the Thatcher revolution. Ironically, the UK is aligning its rate with that of major EU countries in the same year that its exit takes effect.
in detail, In fact, this income tax will be of three levels. Thus companies with profits in excess of 250,000 pounds will only be subject to the full price. Smaller and smaller SMEs will benefit from more advanced rates, or even continue to drive the current rate.
Super discount
On the other side of the spectrum, this device provides a particularly attractive tax incentive for companies that will have the opportunity to invest a lot. For a period of two years, the “super discount” will allow companies to deduct 130% of their investment. Concretely, if the company invests 100,000 pounds in new equipment or new technologies, it will benefit from a tax exemption of 130,000 pounds. This includes attracting or retaining foreign companies and forcing them to invest, while offsetting the effects of higher interest rates.. Concretely, the big corporations will pay an additional six points in taxes … or on the contrary, they will benefit from exceptional tax gifts if they take more risks. Thus the principle is similar to that of free ports, and is another central component of the post-Brexit strategy.
“Companies cannot afford to borrow or invest. And let’s remember that 100% tax cuts have been tried in the past, without causing a real boom.”
The total revenue shortfall for tax authorities is projected to reach £ 27 billion, directly, according to the Office for Budget Responsibility.. It remains to determine the positive ramifications, in a context in which only tech giants emerged stronger from the crisis. Investments in the British economy could amount to around 20 billion pounds sterling, thereby boosting other companies, but that is still a gamble. This’ super discount ‘has never been tried and is the only innovation in this budget.’Richard Murphy, a consultant and founder of Tax Research UK, notes. “The investment can increase a little. But companies cannot borrow or invest. And let’s remember that 100% tax cuts have been tried in the past, without causing any real recovery.”
A disguised gift for Gafa
This action is considered by many observers A disguised gift for Gafa, even Gafa’s tax suspension, Introduced in April 2020 which takes 2% of the UK’s revenue from search engines, online and social media platforms.
The numbers speak for themselves: For example, Amazon has invested more than £ 23 billion in the UK over the past 10 years. The platform, which records a portion of its sales in Luxembourg, paid 293 million pounds in taxes in 2019, compared to 13.7 billion pounds in sales. This means that Amazon could theoretically be tax exempt for two years if this device will last.
The freebies enjoyed by Amazon and other tech giants over the decade have caused a lot of dental vibration. In 2019, Amazon’s total tax rate was just 2.1% on all UK reported revenue 2.5 times lower than that for traditional retail groups.
International tax on Java for 2021?
As London relaxes its tax rules on Gafa (Google, Amazon, Facebook, and Apple), the The discussions in the Organization for Economic Cooperation and Development to reach an international agreement on this issue recently picked up the hair of the beast. More recently, the prospect of a compromise in mid-2021 has dominated the situation. And with good reason:The Biden administration has backed away from the positions of the Trump era This led to the file being blocked since the end of 2019.
But what exactly are we talking about? The ongoing negotiations in the Organization for Economic Cooperation and Development revolve around two pillars. The first relates to Distribution of tax rights between countries of production and countries of consumption. It is mainly a matter of where to pay the tax. The second pillar relates to B. The minimum tax, set between 12.5% and 15%, which applies to multinational companies of a specific sales number.
Who will be targeted?
According to the Organization for Economic Cooperation and Development (OECD), A tax on digital companies would bring in between $ 5 billion and $ 12 billion in tax revenue annually. But the ambition is much broader: some dream of applying the new rules to multinational companies with “digital” activities, in other words to all multinational companies, which would bring in between 42 and 70 billion.
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What will be the scope of the measures? How will the funds be collected and distributed? There are still many delicate questions to be answered. Optimists, some politicians are betting on a deal by summer. With greater caution, observers note that the link between the two pillars and the important reservations expressed by some negotiators, Including the United Kingdom, You risk bothering everything.
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