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Adam Smith Institute

@ASI

, 7 tweets, 2 min read

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@CatoInstitute

@CatoInstitute

The Factory Tax is holding back Britain, @CatoInstitute’s @MrRBourne writes in the @Telegraph referencing the @ASI’s latest paper.

telegraph.co.uk/business/2020/…

“A key cause of [low productivity] is surely Britain’s stingy capital allowances for these investments within its corporation tax code – a phenomenon the Adam Smith Institute (ASI) has called a “factory tax”.”

“While the UK has a low headline corporation tax rate, new fixed capital investments can only be partially claimed back by businesses over time, rather than immediately written off like spending on raw materials or workers’ wages.”

“Given inflation and foregone uses of those funds, the effect of this inability to fully recoup these investment costs is capital-intensive industries being tax disadvantaged relative to other sectors.”

“Our complex system of depreciation schedules and asset lives, in other words, is an effective tax on manufacturing and factories...”

“... tilting the UK’s industrial structure away from the Midlands, Yorkshire and Wales (where manufacturing is relatively strongest) and towards the South East and London (where services and finance are concentrated).”