Has the corporate tax cut brought in money? – Channel 4 News

“The last time we cut corporation tax, we brought more revenue into the Treasury because more companies wanted to come to Britain, more companies wanted to invest in our country. .”

That was Liz Truss’ assertion in her very first Questions to the Prime Minister.

Corporation tax is a tax that companies in the UK pay on their profits. Ms Truss’ claim today came in response to criticism from Labor that she was planning to reverse a planned corporation tax rise which was scheduled for next year.

It is true that the total amount the government has levied on corporation tax has increased after the government reduced the overall rate from 20% to 19% in 2017.

But is the reduction in the headline rate the cause of this extra money, as Ms. Truss seems to suggest?

The Independent Institute for Tax Studies (IFS) says otherwise: “Corporation tax revenues have increased since 2010 even as the overall rate has been reduced. But that doesn’t mean the rate cuts have boosted revenue.

IFS’ Stuart Adam told FactCheck that there were other factors at play.

One is what economists call ‘base broadening’ – the government made a series of changes that meant more companies were taxed and more of their profits fell to the Corporation tax.

Another factor is that during the 2010s the economy was coming out of the financial crisis of 2008. So even if the headline rate had not been reduced, we would still expect the government to take more revenue corporate taxes simply because companies were doing better and making more taxable profits.

And it is worth saying that while the overall rate of corporation tax has been reduced, other types of corporation tax have seen their rates increase during the period to which the Prime Minister refers . Again, it is hardly surprising that corporate tax revenues have increased.

FactCheck Verdict

Liz Truss suggested corporate tax revenues rose because the government cut the headline rate, which it did in 2017. But, according to the Institute for Fiscal Studies, other factors explain the increase in income during this period.

Downing Street has been contacted for comment.