§ I now come to my proposals on taxation. A major purpose of this Budget is to adjust taxation so as to help and improve our industrial performance. Our business tax system is generally recognised as giving very generous incentives to new investment, and the scheme for stock relief which I introduced in 1974 has also been of immense value to industry. I think the House would agree that 1199 what industry requires now is stability in its tax environment. I have therefore decided again to make no major changes this year in the rate of corporation tax or in the levels of investment incentives.
§ In my Budget Statement last year I said that the stock relief scheme would continue in its present form for 1977–78 and 1978–79. I then hoped that the debate on current cost accounting might by now have reached the stage where we could move to a permanent scheme of relief. But it is now clear that more time is needed for discussion of inflation accounting and, when an accounting standard has been agreed, tried and tested, for deciding how far it can be used for tax. I intend, therefore, to retain the present scheme for 1979–80, and to continue it indefinitely until a permanent scheme can be introduced.
§ However, I recognise that there is continuing concern about the build-up of deferred tax liabilities in company accounts and the effect that this may have on the raising of investment capital and investment decisions. This is a matter which can best be dealt with as part of the permanent scheme. I wish, however, to dispel any anxiety among industrialists that, with the present scheme continuing indefinitely, they may be faced with a mounting volume of potential tax liabilities.
§ I, therefore, give this assurance now: if, this time next year, we are still unable to see what form a permanent scheme will take, we shall introduce legislation to limit the build-up of these liabilities as follows. First, the balance of the relief for the first two years of the scheme will be written off. Second, we shall build into the present scheme similar provisions for a write-off of so much of the relief for each subsequent year as remains after a six-year period. This will remove the major criticisms which industry has of the present arrangements and will enable stock relief to continue in more or less its present form until a permanent system is available.
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cc1199-201
- SMALL BUSINESSES 611 words c1201
- PROFIT SHARING 149 words c1202
- CAPITAL GAINS TAX 192 words cc1202-3
- TAX AVOIDANCE 181 words