Barring a last-minute change of heart, UK Corporation Tax will rise to 25% on April 1st. Some people think this tax is paid by ‘business,’ but this is not true. At the end of every tax is a purse or wallet of the person who pays it. A business is not a person, and has no purse or wallet. It passes on taxes that are levied upon it.

UK Corporation Tax is handed over to government by companies, but its incidence is upon their employees, shareholders or customers. The burden of corporation tax affects employees, shareholders and customers in different ways. For example:

Employees: If a company's profits are reduced due to higher corporation tax bills, the company has less money available to invest in employee salaries, bonuses or benefits. Like the misnamed ‘employer contribution’ to National Insurance, it comes out of the wage pool that would otherwise be available for salaries and benefits.

Shareholders: If a company's profits are reduced due to higher corporation tax bills, the company has less money available to pay dividends to shareholders, diminishing their investment returns. Instead of being available for further investment, the money is instead spent by government. It can further hit investors by lowering the value of the company’s shares, and discouraging investment in it.

Customers: If a company's profits are reduced due to higher corporation tax bills, the company may have to increase prices to maintain its margins, which impacts upon the customers who buy its products or services.

Overall, while corporation tax is handed over by the company, its impact is upon its various stakeholders, including employees, shareholders and customers. Estimates of its proportional incidence upon the three groups vary, but many reliable studies suggest that some 60% of Corporation Tax falls upon the employees, with the remaining 40% split between shareholders and customers.

A fourth party impacted by the tax is the nation itself and its wellbeing. The tax discourages firms from investing and expanding in the UK, and encourages others to think in terms of expanding abroad in less onerous tax regimes. Earlier this month, AstraZeneca's chief executive said it wanted to build a new plant in northwest England but "because the tax rate was discouraging" it chose Dublin instead.

If the UK goes ahead with the planned Corporation Tax increase, there will be a talent and investment drain from the UK, alongside a fall in the talent and investment coming in from abroad. Combined with the adverse impact on employees, shareholders and customers, it might be time for a rethink.

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(Note that the graphic at the top is from a 2017 Conservative advert with statistics from HMRC and IFS. Maybe they should revisit it).