Post-Covid tax hikes: London pointing the way forward?
Britain's Chancellor of the Exchequer Rishi Sunak has presented his budget for 2021 and explained the plan for economic recovery and reducing the debt incurred due to the pandemic. In the short term, aid measures amounting to 65 billion pounds (just over 75 billion euros) will continue. From April 2023, taxes on companies' profits will increase from 19 to 25 percent. Commentators take notice, especially since for many the planned measures mark a U-turn.
The work of many decades
NZZ sees the UK's approach to reducing its coronavirus debt as exemplary:
“Britain will be the first major industrialised country to raise corporate taxes. ... Many governments will soon face the question of what burdens to impose on their citizens, and how quickly. The coronavirus programmes and the tax losses from the lockdowns have caused national debt to explode. ... But how to counteract this without smothering economic recovery in the short term? Sunak is taking a cautious and yet decisive approach. ... Repaying the coronavirus debt will be 'the work of many governments, over many decades', he says. If it ever succeeds, one would like to add.”
Paradigm shift for the Tories
With their plans for corporate tax hikes, the Conservatives are turning their back on long-held principles, the Financial Times comments:
“By extending relatively generous Covid-19 support measures until September - well after the economy is due to reopen - the chancellor avoided a nasty cliff edge. The Augustinian 'make me chaste, but not yet' approach of spending now but taxing later starts to re-establish the Conservative party commitment to sound public finances. Signalling that much of the tax burden, when it comes, will fall on big business buries the vision of a low-tax, post-Brexit Britain. It also signals a shift in the Conservative orthodoxy that has reigned since the Thatcher era.”
Northern Ireland's Unionists in a bind
London's U-turn faces the pro-British politicians in the administration in Northern Ireland with a tough choice, RTE News observes:
“For several years it [the Stormont Executive] has been making the case for Northern Ireland to be allowed to bring its corporation tax rate closer to the 12.5 percent regime that applies in the Republic of Ireland. In the past the strategy of pushing for alignment with the rate south of the border has enjoyed cross-party support at Stormont. ... Unionist parties may have to decide if they wish to have Northern Ireland rates no different than the proposed 25 percent British system or if corporation tax is one area where, for competitive reasons, Northern Ireland should mirror the rate on offer in the Republic of Ireland.”
Highly dangerous blinker policy
The IMF has warned of social unrest after the pandemic. But in practice neither the Fund nor the governments seem to care about this risk, Mediapart criticises:
“It's no secret that prioritising debt reduction means either reducing social benefits or expanding supply policy in favour of capital and at the expense of employment, or both. Like the governments, the IMF appears to have chosen the latter option. The situation is highly explosive. In its research papers the IMF warns of the social risk, but in practice it promotes policies that increase this risk. This illustrates a dominant feature of our time: Neoliberalism is in crisis but remains the dominant reference of the elite.”