| Time for the UK to cut corporation tax |
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| Written by Richard Howard | |
| Monday, 12 March 2007 | |
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A report in this week's Sunday Times highlighted how the UK's complex corporate tax regime is making the country less competitive in attracting and keeping businesses. A survey conducted for the CBI showed that 22% of UK companies had relocated some activities abroad and that a further 17% were considering doing so. Most of the companies blamed the tax regime for the moves. The CBI and the Institute of Directors are both calling for a reduction in public spending by the Chancellor so that he can afford to cut corporation tax. The IoD is looking for a cut from the current rate of 30% to 28% so that Britain can remain competitive. A report by Ernst & Young also showed how Britain has become less competitive over the last seven years. In 2000, Britain, with a 30%, had a relatively low level of corporation tax compared to other OECD countries where the average was 33.7%. However, Britain has stood still while other countries have innovated to become more competitive and attract more business. The average OECD corporation tax is now 29.1%. Britain now has the EU's seventh highest rate of corporation tax, roughly double those in Ireland. It is obvious that if the UK is to compete in todays global economy, it will have to foster a more business friendly environment. Britain has been stationery while the world has moved on and in the current climate of more globalised industries with companies offshoring more and more work, stationery is a very dangerous thing to be. The high corporation tax is discouraging business investment in the UK. The chancellor should follow the example of Iceland and Ireland who have shown that reducing corporation tax does not reduce the income of the Treasury, and it can actually boost it. The only thing stopping Gordon Brown from doing this is politics, as he does not want to be seen to being in thrall to business. However, this is a very dangerous image game for him to be playing when the health of the economy and people's jobs and livelihoods are at stake. |