‘Sunak taxing business will just see clever avoidance’

Their policies are not just anti-growth, they will prevent new businesses from emerging, crush existing ones and drive away more successful ones. The net effect of the programme on which they are embarking will be to hollow out our private sector.Within days of taking office, the Prime Minister U-turned on two crucially important policies he had promised to deliver.The first was fracking and the second was removing from the statute books the reams of regulations and laws we have brought with us from the EU.There can be no fiscal excuse for these reversals. Neither would cost the Treasury a penny. Quite the reverse, and both are crucial for growth.There is no hope of a sustainable economic recovery without a realisation that we are in this economic mess significantly because of decades of neglecting the country’s energy needs.Renewables on their own come nowhere near being a solution. Instead of banning fracking, Sunak should be declaring gas to be a perfectly acceptable fuel (it is) and championing its extraction from the North Sea as well as all other means possible. Sunak should be declaring gas to be a perfectly acceptable fuel (Image: GETTY)We have huge stores of gas below our feet and off our shores. To ignore it, while people cannot afford to heat their homes and businesses produce their goods, is a dereliction of duty.The media has successfully trashed Liz Truss’s sensible tilt at reducing taxes from their 70 year high but there has been no commentary on her equally sensible tilt at deregulating.Why has Sunak gone quiet on ditching Solvency II? This one step alone would free up billions for insurance companies to invest in the UK.At a time when the cost of money is rapidly rising, we need as much access to capital for investment as we can find.There is an equally strong case for reducing capital adequacy ratios for banks. The capital released could be targeted at bolstering investment in British businesses and ensuring the shock being delivered to homeowners by Andrew Bailey does not get totally out of hand.So should the cap on bankers’ bonuses be removed? We need to attract the brightest and best to London; not push them to New York and Tokyo. The cap was a typically blunt EU tool designed to fetter London.Every regulation creates a monetary burden for business. Regulations constrain profits and growth. Instead of abandoning the task of unpicking EU regulations as being beyond government right now, Sunak should be doubling down on it.A drive to deregulate would unquestionably be the most cost-effective way to boost growth.Apart from reversing Truss’s tax cuts, the media is reporting a desire by Hunt to increase taxes on dividends and capital gains. He apparently wants to target entrepreneurs. This would be in addition to increasing corporation tax by a whopping 30 percent from 19 percent to 25 percent.These ‘entrepreneurs’ have had their businesses kicked in the shins by intermittent lockdowns for over two years and now face spiralling fuel costs.A higher tax on dividends would, in effect, be a higher tax on their already diminished profits caused by the difficult economy and his new higher corporation tax rate. There will be economic behavioural changes as a result of such an attack.I run a business I founded and in which I still own a significant interest. When I read about Sunak’s commitment to increasing corporation tax, I knew immediately all boards of directors would be forced to consider ways legitimately to avoid it; for example, by not repatriating profits made abroad.And, when I read about Hunt’s apparent desire to increase the tax on dividends (already hiked by prior Conservative administrations) I knew many would now also be forced to consider cutting their companies’ dividend payments.Why pay out diminished precious net earnings when doing so would mean bringing profits back to the UK where they will be taxed again and then again?Every single CEO of a British based business will have had similar thoughts. Many will follow through with them. But there is a bigger issue with all these taxes. Entrepreneurs will stop opening businesses and investing in the UK.The net effect will be less money being brought to the UK, less money invested, less money circulating in the economy and a resultant structural reduction in economic activity. With that will come reduced living standards and, yes, reduced revenue for the Exchequer.The intent of Messrs Sunak and Hunt not to free up our energy supplies, not to deregulate and to combine these restrictive policies with even higher taxes – while interest rates shoot upwards – is economic harakiri.