Rise In UK Corporate Tax Revenues Eases Pressure On Brown To Raise Tax

by Robert Lee, Tax-News.com, London

23 July 2004

An unexpected windfall in UK corporate tax revenues last month has left the Treasury’s finances in better shape than anticipated, although economists remain sceptical that future tax hikes will be avoided.

According to figures released by the National Statistics Office, corporate tax receipts rose to £1.1 billion in June from £581 million, whilst income and capital gains tax revenues increased by 7% to £8.7 billion.

The news will ease the pressure on the Chancellor Gordon Brown to keep his self-imposed ‘golden rule’ of only borrowing to invest over the course of the economic cycle. However, many economists believe that Brown’s revenue projections remain over optimistic and will not cover ambitious spending plans.

"While today's tax figures are good news for the Treasury, we remain less optimistic than the chancellor over growth in tax receipts over the medium term," stated Christine Frayn, senior research economist at the Institute for Fiscal Studies, according to the Financial Times.

The Treasury however, remains confident that the public finances will remain in check, noting in a statement:

"The figures show a slightly more favourable position than forecast in Budget 2004. The government will meet all its spending commitments while remaining committed to meeting our fiscal rules."

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