Britain's coalition government has announced cuts in corporation tax and has promised to review the current income tax system in its budget for the coming year.
Delivering his 2011 Budget to parliament, finance minister George Osborne said today said the government was cutting corporation tax by 2 per cent this year, and would decrease it by 1 per cent per annum for the next three years until it reaches 23 per cent.
The government also said that personal tax allowances are also set to rise, increasing by £630 to just over £8,100.
The bank levy imposed by the government will also be adjusted to take account of the impact of this reduction on banks. The levy will also be used to fund a £250 million scheme for first-time buyers to enable 10,000 families to get on to the property ladder.
Mr Osborne said the government was also looking into the possibility merging income tax and national insurance. The budget also abolished some 43 tax reliefs in an attempt to simplify the system.
Meanwhile, a proposed rise in air passenger duty this year has been postponed, and fuel duty will fall by 1p per litre from 6pm. The budget also imposed higher charges on oil and gas production which Mr Osborne said would raise £2 billion.
The government has postponed until next year an inflation rise in fuel duty that was due to come into effect next week.
Targeting overseas investment, the budget also included provisions for a 5.75 per cent rate on overseas financing income to attract international investment.
The British government is also set to impose a higher charge on non-domiciled taxpayers, increasing it from £30,000 for those in the country for seven years to £50,000 for those in the country for 12 years. This measure will raise more than £200 million, Mr Osborne said.
Research and development tax credits for small businesses are set to be increased, while new funding for training and apprentice schemes will be provided.
Mr Osborne said Britain's economy will grow more slowly in 2011 than previously hoped. New forecasts from the government's fiscal watchdog, the Office for Budget Responsibility, predicted the economy will grow 1.7 per cent this year and 2.5 per cent in 2012.
This is a downward revision from November's estimates of 2.1 per cent growth in 2011 and 2.6 per cent in 2012.
Mr Osborne said inflation, which currently stands at 4.4 per cent, would remain in the range of 4 to 5 per cent this year. However, it is expected to fall back to 2.5 per cent next year, before decreasing to the 2 per cent threshold set by the Bank of England.
Public borrowing is also set to fall less steeply over the next four years than previously thought, but Mr Osborne said the budget deficit was still on track to be eliminated by 2015.
The current fiscal year's borrowing will be slightly lower than previous forecasts at £146 billion, but borrowing thereafter will fall more slowly than expected last November, to £122 billion in 2011/12, £101 billion in 2012/13 and £70 billion in 2013/14.
This compares to November estimates when the government said it expected public borrowing to total £148.5 billion in 2010/11 and to fall to £117 billion in 2011/12, £91 billion in 2012/13 and £60 billion in 2013/14.
Mr Osborne said national debt was forecast to be 60 per cent of national income this year, and would peak at 71 per cent before falling to 69 per cent by the end of the spending review period.
Additional reporting: Reuters, PA
