Labour pledges corporation tax rise alongside reliefs

by Calum Fuller

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30 Jun 2014

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Ed Balls

A RANGE of new tax breaks would be introduced alongside a rise in corporation tax should Labour form the next government, Ed Balls is to pledge today in a speech to the London School of Business.

Despite looking to shift the headline corporate rate upwards, Balls is keen to keep it the lowest in the G7 - currently anything lower than 26.5%.

New tax reliefs aimed at encouraging long-term investment in the UK are to be put forward as Labour seeks to get business onside ahead of next year's election.

Those include the allowance for corporate equity, which would cut the tax bill for businesses raising capital by selling shares to use in the funding of takeovers and other growth.

The reaction has so far been positive, with the CBI welcoming Balls' proposals.

Deputy director-general Katja Hall said: "A competitive business tax system is crucial for future growth - and that includes an attractive headline rate of corporation tax.

"Tax and other measures to boost business investment, including capital allowances and equity finance will help firms of all sizes harness their potential, particularly medium-sized companies and those in the manufacturing sector. It is also important that the tax system encourages and rewards a long-term investment focus.

"The best way of ensuring the recovery benefits all is through a thriving private sector and businesses of all sizes will deliver this growth."

Critics of the plans say they favour companies which borrow heavily, but Balls claims the measures are "pro-business, but not business-as-usual".

"If we are to maintain public support for an open market economy, we need to address public concerns, promote competition and long-term investment and make sure markets like energy and banking work better for consumers and businesses alike," he will outline.

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