Corporation Tax and Capital Allowances

Ways and Means – in the House of Commons at 3:31 pm on 29th November 1994.

Alert me about debates like this

First, I should like to say a few words about corporation tax and capital allowances. We have one of the lowest corporation tax rates in the industrialised world. Low tax rates are good for incentives. They mean that businesses can keep more of their profits to use as they, the businesses, want. Since 1984 we have cut the main corporation tax rate from 52 per cent. to 33 per cent., while scaling back capital allowances to a level broadly matching commercial depreciation.
I have considered again all the calls for increased allowances to encourage investment. They have a simplistic appeal. But I remain firmly of the opinion that increasing capital allowances would distort investment decisions and would not encourage the high-quality investment needed to improve economic performance. A narrower tax base would jeopardise our ability to maintain the low tax rates which have helped to transform British industry over the last decade.
The change from high capital allowances to low rates of corporation tax has been very successful. I propose to maintain that emphasis on low rates for the successful rather than high allowances for all in our system of business taxes. I also have no changes to announce on the rate of advance corporation tax or the value of the tax credit on dividends.