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B1011 – Corporation Tax Reform Bill 2016 (Second Reading) Watch

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    B1011 – Corporation Tax Reform Bill 2016 (Second Reading), TSR Labour Party

    Corporation Tax Reform Bill 2016
    An Act to introduce a progressive, bracketed system of corporation tax for non-ring fence profits to aid small business development.

    BE IT ENACTED by the Queen’s most Excellent Majesty, by and with the advice and consent of the Commons, in this present Parliament assembled, and by the authority of the same, as follows:—

    Preamble: The use of a bracketed system as used in income tax will give the government more freedom to target its fiscal policy to encourage small business growth and generate revenues. As with the current corporation and income taxes this bill does not legislate to establish specific tax bands or rates, instead leaving that for the government to propose in it's budget and for Parliament to ratify.

    1: DEFINITIONS
    All definitions shall be the same as in the Corporation Tax Act 2010.

    2: AMENDMENTS
    (1) In the Corporation Tax Act 2010, Part 2, Chapter 3.1 shall be amended to read: Corporation tax is set under the methodology established in the Corporation Tax Reform Act 2016.

    3: CORPORATION TAX
    (1) The non-ring fence profits of companies shall be taxed at a rate corresponding to the profit band that the company is in.
    (2) Companies shall be allocated to profit bands each financial year based on their pre-tax profits for that year.
    (3) The profit bands are as follows--
    a) Band I
    b) Band II
    c) Band II
    (4) Of these, Band III shall include company's with yearly profits greater than those in Band II which, in turn, shall include those companies with greater profits than those in Band I.
    (3) Band I, II and III for a tax year are to be determined as such by Parliament for the tax year.
    (4) The Parliament for a tax year may vote to group all companies into a single Band, paying a single, universal rate of corporation tax.

    4: CORPORATION TAX RATES
    (1) Corporation tax will be charged at the following rates--
    a) Rate I (for Band I companies)
    b) Rate II (for Band II companies)
    c) Rate III (for Band III companies)
    (2) Of these, Rate III shall be a greater percentage of a company's profits than Rate II which, in turn, shall be a greater percentage of a company's profits than Rate I.
    (3) Rate I, II and III for a tax year are the rates determined as such by Parliament for the tax year.

    5: COMMENCEMENT, SHORT TITLE AND EXTENT
    (1) This Bill may be cited as the Corporation Tax Reform Act 2016;
    (2) This Bill shall extend to the United Kingdom; and
    (3) Shall come into force upon Royal Assent.

    Notes, Worked Example, Changes for Second Reading
    Spoiler:
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    Notes:
    The provisions of this bill allow for the Parliament of the day to take a more sophisticated approach to corporation taxation by moving to a progressive model. As such, expansionary fiscal policy can be pursued without inflicting so great a burden on the public finances. However section 2.4 creates flexibility, allowing for the Parliament of a particular tax year to still set a single 'main' rate of corporation tax when doing so would be prudent. Thus, this bill only expands the powers of Parliament, without establishing any burdensome limitations.

    http://www.legislation.gov.uk/ukpga/2010/4/contents

    Worked Example:
    (using figures for the 2013/4 financial year - source)

    Revenue generated from the companies in hypothetical 'Band I' (payable tax below £500,000): £18,995,000,000
    Revenue generated from the companies in hypothetical 'Band II' (payable tax above £500,000 and below £5,000,000): £7,580,000,000
    Revenue generated from the companies in hypothetical 'Band III' (payable tax above £5,000,000): £13,635,000,000

    Corporation Tax total revenue: £40,210,000,000 (with universal 20% tax rate)

    Adjust Tax Rates as follows:
    Rate I = 15%
    Rate II = 20%
    Rate III = 22%

    New Total Tax Revenue: £40,210,000,000 - 4,748,750,000 + 1,363,500,000 = £36,824,750,000

    The result is a relatively meagre reduction in government revenues but a sizeable tax cut for more than 1,000,000 businesses.


    Changes for Second Reading:
    - Definitions section added
    - Commencement amended (to allow for discrepancy between real and 'TSR' calendars)
    - Minor changes to formatting, numbering and notes section
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    Yea go on then.
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    No, I am against the idea of businesses paying different rates because a business that made good business decisions to expand to become the leading business in its market should not be punished by being forced to pay higher taxes, when a company who made less good decisions, or sells an inferior product is rewarded with lower taxes.
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    (Original post by Nigel Farage MEP)
    No, I am against the idea of businesses paying different rates because a business that made good business decisions to expand to become the leading business in its market should not be punished by being forced to pay higher taxes, when a company who made less good decisions, or sells an inferior product is rewarded with lower taxes.
    But this helps businesses which are in their early stages so that they will be in a position to expand at a later date.
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    The basic premise of tiered rates I support. I am disappointed though that nothing is done about multi-national tax avoidance, which this Bill could have done. The simplest would have been a minimum percentage of turnover to be paid for any company with sales over a set level in the UK.
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    (Original post by cBay)
    But this helps businesses which are in their early stages so that they will be in a position to expand at a later date.
    No it does not, if businesses are to be helped there should be a tax cut for all businesses, tax cuts for smaller businesses is a way of targeting prosperous businesses.
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    (Original post by barnetlad)
    The basic premise of tiered rates I support. I am disappointed though that nothing is done about multi-national tax avoidance, which this Bill could have done. The simplest would have been a minimum percentage of turnover to be paid for any company with sales over a set level in the UK.
    Start writing bills to get your ideas done; spending time writing motions, making jokes no members laugh at, and complaining about things does not get things done: write a bill if you want to see multinational corporations pay tax.
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    (Original post by barnetlad)
    The basic premise of tiered rates I support. I am disappointed though that nothing is done about multi-national tax avoidance, which this Bill could have done. The simplest would have been a minimum percentage of turnover to be paid for any company with sales over a set level in the UK.
    Not everything has to be done at once.
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    (Original post by barnetlad)
    The basic premise of tiered rates I support. I am disappointed though that nothing is done about multi-national tax avoidance, which this Bill could have done. The simplest would have been a minimum percentage of turnover to be paid for any company with sales over a set level in the UK.
    That's a good idea that we're going to have a think about and may well introduce it in a future bill, but for now we want to stick with what we've got and keep things simple. Hope you can get behind this.
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    a'ight
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    (Original post by Nigel Farage MEP)
    No it does not, if businesses are to be helped there should be a tax cut for all businesses, tax cuts for smaller businesses is a way of targeting prosperous businesses.
    I'm afraid to say that I agree with Nigel on this one.
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    I will support this Bill and propose a separate one on clamping down on corporation tax avoidance.
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    Division! Clear the lobbies!
 
 
 
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