Tax increases in the upcoming Budget could undermine the UK’s economic recovery from Covid-19, the Treasury Committee has warned.
In a cross-party report published as part of its Tax After Coronavirus inquiry, the committee said that “now is not the time for tax rises or fiscal consolidation”.
It added, however, that “significant fiscal measures, including revenue raising, will probably be needed in future”.
The Government’s ‘tax lock’ manifesto commitment on income tax, national insurance and VAT is expected to come under pressure, and a “moderate” increase in corporation tax could raise revenue without damaging growth, the committee argued.
The report also called for reform of stamp duty land tax (SDLT) and said that the Government should support businesses by introducing a temporary three-year loss carry-back for trading losses.
Mel Stride MP, chair of the Treasury Committee, told the BBC it was “almost inevitable” that some taxes would be increased.
Speaking to BBC Radio 4’s Today programme, he said: “Putting up taxes is in general not a great thing to do but we are where we are and I think the committee view is that looking at income tax and looking at corporation tax is… the right way to go.”
Stride added: “Each 1% increase in corporation tax raises about £3bn so I think… [it] is almost inevitable that some level of rise in going to occur.”
Chancellor Rishi Sunak will unveil the Budget on Wednesday.