UK Treasury Secretary Rishi Sunak has unveiled a new £ 65bn ($ 90.7bn) package to help the country’s economy recover from the coronavirus crisis.
Speaking in parliament on Wednesday, he announced the launch of a £ 25bn “super-deduction” tax program that should spur business investment growth.
The program, which, according to the minister, provides “the largest business tax incentives in modern history,” will allow companies to deduct 130% of their investments from the tax base this year and next.
This will allow the business to cut tax payments by 25p per pound, writes the Financial Times.
At the same time, from 2023, corporate income tax in the UK will increase from 19% to 25%, Sunak said.
“The government is providing business with more than £ 100 billion in aid in the face of the pandemic, so it is fair and even necessary to ask them to contribute to our recovery,” Sunak said.
He noted that even with a corporate tax rate of 25%, it will be the lowest among the G7 countries.
The UK economy will be able to recover from the losses incurred by the coronavirus pandemic by mid-2022 – six months earlier than expected thanks to rapid vaccination of the population, Sunak said in an announcement from the Office for Budget Responsibility (OBR).
According to the OBR forecast, the UK economy will grow by 4% in 2021, 7.3% in 2022 and 1.7% in 2023. For 2024 and 2025 OBR forecasts economic growth at 1.6% and 1.7%.
The rapid vaccination against COVID-19 allowed the British authorities to lift the bulk of the restrictive measures, however, in the first quarter of this year, GDP is likely to decline, since back in January the country had a tough lockdown due to the detection of a new strain of coronavirus.
To date, more than 30% of the UK adult population has received at least one dose of COVID-19 vaccine, and the country’s authorities expect to vaccinate almost all adults by the end of July, writes Dow Jones.
By comparison, about one fifth of the population is vaccinated in the United States and 7.5% of the population in the European Union. Sunak noted that the effects of the pandemic on the British economy will be felt for several years to come.
According to OBR estimates, in five years, UK GDP will be about 3% lower than it would have been in the absence of a pandemic.
“The damage to the economy caused by the coronavirus is serious,” Sunak said.