Corporation Tax (Hansard, 31 January 1991)

§ 8. Mr. Gill
To ask the Chancellor of the Exchequer what estimate he can give of the amount of corporation tax he will collect from private companies in the current tax year.

§ Mr. Maude
Corporation tax was estimated in the autumn statement to yield £21.2 billion in 1990–91. I am afraid that information on the yield from private companies is not available.

§ Mr. Gill
In framing his Budget proposals, will my hon. Friend take into account the desirable and beneficial effect on the economy of allowing successful companies to retain more of their earnings, which would inevitably be spent on research and development, training and more capital investment? Will he further bear it in mind that the ploughed-back profits of private companies are inevitably their only source of capital?

§ Mr. Maude
Our rates of corporation tax are already exceptionally low, which is helpful to the corporate sector. Our regime for small companies is the most generous in the industrialised world. My hon. Friend will have been encouraged by the survey published by the CBI this week, which shows that a majority of companies expect to maintain or increase expenditure on training and to maintain expenditure on research and development. That is particularly encouraging because in the downturn of the early 1980s those two items were the first to be cut.

§ Mr. Robert Sheldon
The hon. Member for Ludlow (Mr. Gill) was at least partly right. Companies that intend to use their money for investment should be given some incentive. Should not that incentive be a change in the capital allowances? This is a period in which there will be some disinvestment. It falls to the Chancellor to ensure that at such a critical time, investment is maintained as far as possible. The 25 per cent. capital allowances level is nonsense.

§ Mr. Maude
All the evidence suggests that the 25 per cent. capital writedown reflects the real depreciation in the 1097 value of investment. If anything, it is more generous than the economic assessment of the depreciation. The Opposition have maintained for a long time—and I agree with this—that spending on research and development, and on training is an investment as well, so we should seek to maintain spending there. I am less gloomy than the right hon. Gentleman seems to be and I draw great comfort from the indications in the Confederation of British Industry survey.

§ Mr. David Shaw
Will my hon. Friend examine the amount raised by corporation tax over the past few years and will he reflect that the vastly increased amounts raised are a result of the successful way in which the Government have run their economic policies and of the great expansion of British industry? Nevertheless, in framing his Budget, will my hon. Friend take into account the fact that the successes of the past are now resulting in considerable corporation tax having to be paid at a time of cash flow difficulties and the fact that too much tax paid to the Government will have an effect on investment? Perhaps my hon. Friend and his colleagues will consider reducing the rate of corporation tax for private companies in the forthcoming Budget.

§ Mr. Maude
I hear what my hon. Friend says. He would not, of course, expect me to anticipate my right hon. Friend's Budget statement. My hon. Friend is right to draw attention to the very desirable increased profitability of the corporate sector in recent years, which is a reflection of the considerable success of the Government's economic policies.

§ Mr. Nicholas Brown
The Minister's own Department estimates that some £5 billion of tax, including corporation tax, remained uncollected last year. What plans does the Minister have to collect that tax? What proportion of it is corporation tax? What is the Minister going to do to block tax-planning devices, such as those that the Conservative Government introduced in the Finance Act 1981, because the burdens fall on the rest of our citizens?

§ Mr. Maude
The short point is that the best way to prevent tax avoidance is to have a tax system that is simple and straightforward and has low rates. We have pursued that policy and, especially with corporation tax, to which the hon. Gentleman referred, it has resulted in a substantial increase in yield. We are keen at every stage to ensure that loopholes are blocked and that avoidance is prevented. We shall continue to pursue those aims.

§ Mr. John Townend
Is my hon. Friend aware that in the small business sector, cash flow is becoming very difficult? Will he, therefore, when framing his Budget, consider making the first £1,000 of taxable profit in unincorporated businesses and in businesses paying the small business rate exempt from corporation tax, to help their cash flow?

§ Mr. Maude
I have taken careful note of my hon. Friend's suggestion and I shall study it with great diligence.