How Corporate Tax Is Used by the United Kingdom Government to Support Industry - Essay Example

Topic: A Report on how corporate tax is used by the United Kingdom Government to Support Industry Due: Table of Contents Introduction………………………………………………………………………. 3 Findings…………………………………………………………………………… 3 Impacts of corporate Tax on an Industry………………………………………….. 3 Steps taken by the Government to Support Industrial Growth……………………. 4 Conclusion…………………………………………………………………………. 5 Recommendation…………………………………………………………………… 6 Bibliography…………………………………………………………………………. 8 Introduction This report will focus on the corporate taxation system in the United Kingdom, and how the government is using it to support industry. The CEMEX Company is company of choice. Corporate tax in the United Kingdom is tax on profits by companies and on profits of permanent establishment of non- United Kingdom based companies. Income and Corporate Taxes Act 1988 rule corporate tax. After income, NIC, and Vat corporate tax is the fourth in producing government revenue. CEMEX is a Mexican based cement company that has a branch in the United Kingdom (Great Britain Parliament, 2009, pg. 99). CEMEX Company is termed as a risk taking company because it has done well in areas where other powerful companies have not tried to go. In this paper, I will try to show how the government has used corporate tax to support the CEMEX Company and how the company has benefited from this move. Findings The government in the United Kingdom is looking forward to solving the economical problems. In their 2010 budget, they put ways of changing the inadequacy in the monetary and as a percentage of GDP, return the debt rate to a downward path. By so doing the country will get more investors and the economy will grow (McTavish, 2005, pg. 51). Impacts of corporate Tax on an Industry The rise in corporation tax affects companies the same way rise in costs. This is because they have to spend a lot in the production of their products and pay a lot inform of corporation tax. This makes the companies run into losses despite of the efforts they put in (McTavish, 2005, pg. 55). The United Kingdom government is also focused on creating, better, and more spirited taxation system. A better taxation system is through dropping the corporation tax system by one percent. This will help the investors and encourage other companies to increase their production. Another way is through changing the old rules of the Controlled Foreign Company with better and more attractive rules. Steps taken by the Government to Support Industrial Growth The government is removing the old taxation system and has put in a commission to create a newer, more effective and simplified ways of income tax. This was after a series of consultations that these recommendations were put forward. Another way the government is trying to support the industry is through making the United Kingdom one of the best places to begin and even let your business grow (House of Commons, 2009, pg.17). This may be through making the relief holiday for the small business by one year. Another way is through removing rules that cost the business people a lot every year. Without these rules, the small businesses will be in position to make many profits. Through an increase in income tax relief, the government would be able to sponsor upcoming businesses and business growth. As a way to getting a more balanced economy, the government encourages investments and exports. This is through giving support for new capital investment. This may be through extending capital allowance short life from four years to eight years for the plant and machinery. With the new Local Enterprise Partnerships, they would give support for investment across the region. The government would do this by putting up new places lower taxes and lower levels of regulation and planning controls. To encourage investment, the government should also support inward investment. This may be through developing a culture of entrepreneurship within the people. This will make it better for the private sector because it generates a lot of income for the United Kingdom (House of Commons, 2009, pg.19). The government should also increase green investment through support for the carbon price and a Green Investment Bank. The government should also encourage growth in Growth Reviewed sectors these include the healthcare and life science, advanced manufacturing, construction among others. The healthcare sector will benefit because of new health research agency to help in the regulation and improvement of cost effective clinical trials (Scottish Affairs Committee, 2011, pg.3). The advanced market on the other hand will benefit from the changes to capital allowances and foundation of a High Value Manufacturing Technology and innovation centre. The construction sector will also benefit through the major changes in the planning system and through reforms in the way, the government gets projects on construction. To add onto this, the retail sector will also benefit a lot from the earlier mentioned extension of retail holiday to the small business. The space industry will particularly benefit from the definition of regulation for the new space vehicles for lower and more affordable access to space (Scottish Affairs Committee, 2011, pg.5). The government is also trying to support industry through creating a better and more intelligent personnel that can fit anywhere in the United Kingdom this may be through promoting skills and places for employment. Internship and apprenticeship places are important especially for the young people so that they can get experience in their areas of specialisation (Great Britain Parliament, 2009, pg. 102). The technical colleges and Universities should be increased so that they have a more technical workforce that the prospective employers need. Conclusion This report has looked at the way the UK is supporting the industry. This includes making the taxation system better by reducing corporate taxes, making the UK a better place to start and even grow a business by removing costs that would making businesses spend a lot (Kelly, 1988, pg 69). In addition, it encourages investment as a way of balancing the economy and finally, making the youth better in terms of education and giving them internship and apprenticeship programmes. This would help them to become more skilled on their areas of specialisation. These measures are just the start and the government is trying to streamline these ones and see if it can introduce others that will help in supporting the industry. It has been noted that, a better taxation system is through dropping the corporation tax system by one percent. This will help the investors and encourage other companies to increase their production (Flamm, 1987, pg. 29). Another way is through changing the old rules of the Controlled Foreign Company with better and more attractive rules. The government is also removing the old taxation system and has put in a commission to create a newer, more effective and simplified ways of income tax. Recommendations According to the economist Adam Smith, the principles of a good tax system include efficiency, equity, and transparency and certainty. For the United Kingdom to have a better taxation system, they should incorporate the above principles. This will make them get trusted and more people will understand the system and plan on how to pay their taxes. With equity, the citizens will know that the system is fair and taxation is according to how much one makes (Kelly, 1988, pg 74). For the United Kingdom to be one of the best places to start and grow a business, the government should give start up loans at low interest rates and give the business people a longer time to repay the loans. This will help them work to make a profit and pay their loans on time. Creating better and more effective personnel is important because the country will have better results in terms of production on quality of service (Shoven, 2006, pg 112). The government should also introduce policies that govern the running of Small and Medium enterprises. This will increase the growth of production in the country and reduce the overreliance from imports. This in turn increases the economy of the country because the y are producing and selling in the local market. The SME’s will also benefit because the country will be promoting use of local products. The government should also encourage growth in Growth Reviewed sectors these include the healthcare and life science, advanced manufacturing, construction among others. The healthcare sector will benefit because of new health research agency to help in the regulation and improvement of cost effective clinical trials (Faiz et al. 1996, pg. 45). The advanced market on the other hand will benefit from the changes to capital allowances and foundation of a High Value Manufacturing Technology and innovation centre. Bibliography Great Britain Parliament, 2009. The automotive industry in the UK: ninth report of session 2008-09, report, together with formal minutes, oral and written evidence. London: The Stationery Office. House of Commons, 2009. Engineering: Oral and written evidence. Manchester: The Stationery Office. Kelly, M. 1988. Issues and developments in international trade policy Volume 63 of Occasional paper - International Monetary Fund Occasional paper, International Monetary Fund. London: International Monetary Fund. Scottish Affairs Committee, 2011. Video Games Industry in Scotland. Scotland: The Stationery Office. McTavish, D. 2005. Business and public management in the UK 1900-2003. London: Ashgate Publishing, Ltd. Flamm, K. 1987. Targeting the computer: government support and international competition. California: Brookings Institution Press. Niles, W. 2011. Niles weekly register, Volume 17. Princeton: H. Niles, 1820Original from Princeton University Faiz, A. et al. 1996. Air pollution from motor vehicles: standards and technologies for controlling emissions. London: World Bank Publications. Treasury, H. 2009. Pre-budget report December 2009: securing the recovery, growth and opportunity. New York: The Stationery Office. Shoven, J. 2006. Government Policy towards Industry in the United States and Japan. London: Cambridge University Press. Read More