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World Britain needs a 'booster for growth' as tax hikes threaten investment

02:32  06 december  2021
02:32  06 december  2021 Source:   cnn.com

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Britain 's economy needs much more investment . Business says it's unlikely to get it any time soon.

Whitehall pressure to hike levies should be fiercely resisted. We need to keep taxes low – with the Government instead taking advantage of low borrowing costs to channel cash into growth - boosting infrastructure projects. That doesn’t mean already-obsolete trophy assets like HS2, which must now We should use our post-Brexit freedoms to establish “opportunity zones” across low- growth areas, where genuinely new businesses are offered attractive time-limited reliefs on corporation tax . That would not only attract foreign investment but encourage domestic expansion beyond the South East.

Britain's economy needs much more investment. Business says it's unlikely to get it any time soon.

Technicians work on Sunamp heat batteries on the production line at the Sunamp Ltd. factory in Tranent, U.K., on July 26, 2021. © Emily Macinnes/Bloomberg/Getty Images Technicians work on Sunamp heat batteries on the production line at the Sunamp Ltd. factory in Tranent, U.K., on July 26, 2021.

The Confederation of British Industry said in its latest forecast that a "short-lived recovery" in capital spending would end in 2023 because of tax hikes on companies.

Investment in the United Kingdom has lagged that of other advanced economies for decades, and the business lobby group's forecast will deal a blow to Prime Minister Boris Johnson's aspirations for building a high-wage and high-productivity economy.

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But getting tax hikes through even to support badly needed infrastructure investments will be a Herculean challenge, argues Stifel chief Washington policy strategist Brian Gardner. Investment bank Credit Suisse estimated this change in taxes would increase the effective rate by 4% to 5%, and slash off estimated S&P 500 earnings per share. Goldman Sachs projected that Biden’s tax plan would lead it to reduce its 2021 earnings estimate by 12%. Doing so may also retard the post-pandemic economic recovery.

President Biden has proposed increasing the top 23.8% capital gain rate to 43.4%, a staggering 82% increase. Then there is timing. As proposed, the rate hike is already in effect for sales after April 28, 2021.

Business investment would briefly rise above pre-pandemic levels by the end of next year, before slumping as companies are hit by a corporate tax hike and the end to a tax break on some investments in plant and machinery, the CBI said.

The corporate tax rate will rise from 19% to 25% in April 2023. UK finance minister Rishi Sunak announced the hike in March this year to help pay for the costs of the pandemic and reduce government borrowing. The tax break on plant and machinery, introduced earlier this year, will also expire in April 2023.

Investment stagnated following the Brexit referendum in 2016 as companies were deterred by the uncertainty over Britain's future trading relationship with the European Union. It has dropped further since the start of the Covid-19 pandemic.

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Any tax hikes will “probably phase in slowly over time,” she told CNBC. But that doesn’t necessarily mean you won’t see some tax increases this year. Twenty-six states and the District of Columbia have passed notable tax changes that took effect Jan. Moderna Inc. said Friday it will "rapidly advance" an omicron-specific COVID-19 booster vaccine candidate and continue to work on booster candidates designed to anticipate mutations of the coronavirus and to study and test higher booster doses also meant to boost immunity.

This tax hike will also increase energy costs, which will fall disproportionately on low-income Americans. Studies have shown that low-income households pay a significantly higher share of their income on energy costs. On average these households spend 7.2 percent of their income on utility bills, compared The Biden plan to raise taxes on American energy is misguided and will harm workers and businesses in Texas and across the country. It will raise prices, threaten high-paying manufacturing jobs and further weaken U.S. energy independence. Rather than these reckless tax hikes , we should

Capital spending by UK companies fell by 11.6% between the third quarters of 2019 and 2020, the CBI said.

By the government's own admission, business investment was already low by the standards of other advanced economies. A UK Treasury factsheet published in April said: "Much of the UK's productivity gap with competitors is attributable to our historically low levels of business investment compared to our peers. Weak business investment has played a significant role in the slowdown of productivity growth since 2008."

Investment in technology, skilled workers and innovation are key to raising productivity, and boosting growth and incomes without pushing prices higher. The CBI's warning comes as inflation continues to rise. It hit a 10-year high of 4.2% in October, and the Bank of England's chief economist has warned it could exceed 5% in early 2022.

"I know from speaking with firms of all sizes that they have an ambitious investment mindset, and are anxious to implement growth plans. But while intentions have thawed, we're coming up to a cliff edge in 2023," CBI director-general Tony Danker said in a statement.

He said the tax break had been successful but industry needed targeted measures to encourage "the scale of investment we need, particularly in green technologies. A booster for growth is needed to protect and build on our recovery."

Britain's economy should grow by 6.5% in 2021 according to the UK government's own Office for Budget Responsibility's projections. But the economy won't recover its pre-pandemic size until the first quarter of next year, the Bank of England forecasts.

The recovery has been hobbled by Brexit, which the OBR believes will cause more long-term damage to the economy than the pandemic.

Australia to shorten time between booster, initial vaccine doses amid omicron surge .
Australia's health minister said on Saturday the timeline between initial vaccine doses and when a booster shot could be administered would be shortened following an updated recommendation from an immunization advisory group.The Australian Technical Advisory Group on Immunisation has "updated its advice and now recommends Australians receive their booster shot five or more months after the second dose," the country's health minister, GregThe Australian Technical Advisory Group on Immunisation has "updated its advice and now recommends Australians receive their booster shot five or more months after the second dose," the country's health minister, Greg Hunt, tweeted on Saturday.

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