Corporation tax cuts not bold enough

January 19, 2011 4:45 PM

New research by London First has revealed that 60 per cent of 300 senior executives polled at overseas investors in London say their opinion of the capital as a business location has not been changed by the government’s plan for incremental 1 per cent annual cuts in corporation tax from 28 to 24 per cent by 2015. As OECD data shows, 10 out of the rich nations club’s 28 members already have rates at 24 per cent or lower while a further 9 have rates between 24 and 28 per cent. Business leaders who are in positions to bring investment, prosperity and jobs to Britain are clearly underwhelmed by the plan. Only 13 per cent of them reported being favourably influenced by the proposal.

While former head of UK Trade & Investment Sir Andrew Cahn certainly upset many taxpayers with his approach to public money, his recent warning that Britain is losing some of its competitive advantage should concern anyone interested in our economic success:

[caption id="" align="alignright" width="228" caption="Small cuts..."][/caption]
“Britain has become a more regulated location over the last couple of decades”, he said, adding “If you are an inward investor, and you want to expand and create jobs in this country, you will find it’s difficult to build an extension to your factory.”

Britain needs to reform its over-zealous regulations, restrictive planning laws and too-high and too-complicated tax system if we are to fully benefit from the economic growth and opportunity presented by international businesses that might consider us as a place for their operations. A more serious cut to corporation tax, showing that we’re serious about being an enterprise-friendly, competitive economy has to be a priority. The TaxPayers’ Alliance report ‘Tax and entrepreneurship’ studied the effect of tax rates on entrepreneurship and concluded:
“While a range of factors including access to capital, regulations and entrepreneurs’ ‘animal spirits’ can affect the likelihood a new firm will be created, the tax system plays a critical role in whether someone will have the capital to set up a new firm and whether it will be worth their while to do so.”

Chief executive of Think London Michael Charlton said
“While the overwhelming majority of overseas executives in London are happy about doing business in London, they are closely observing key location factors such as corporate taxes, immigration and skills availability… We are taking their concerns seriously.”

And so should the government. A good way to start would be to consider the TaxPayers’ Alliance manifesto call for a cut in corporation tax to 15 per cent or less within 5 years.New research by London First has revealed that 60 per cent of 300 senior executives polled at overseas investors in London say their opinion of the capital as a business location has not been changed by the government’s plan for incremental 1 per cent annual cuts in corporation tax from 28 to 24 per cent by 2015. As OECD data shows, 10 out of the rich nations club’s 28 members already have rates at 24 per cent or lower while a further 9 have rates between 24 and 28 per cent. Business leaders who are in positions to bring investment, prosperity and jobs to Britain are clearly underwhelmed by the plan. Only 13 per cent of them reported being favourably influenced by the proposal.

While former head of UK Trade & Investment Sir Andrew Cahn certainly upset many taxpayers with his approach to public money, his recent warning that Britain is losing some of its competitive advantage should concern anyone interested in our economic success:

[caption id="" align="alignright" width="228" caption="Small cuts..."][/caption]
“Britain has become a more regulated location over the last couple of decades”, he said, adding “If you are an inward investor, and you want to expand and create jobs in this country, you will find it’s difficult to build an extension to your factory.”

Britain needs to reform its over-zealous regulations, restrictive planning laws and too-high and too-complicated tax system if we are to fully benefit from the economic growth and opportunity presented by international businesses that might consider us as a place for their operations. A more serious cut to corporation tax, showing that we’re serious about being an enterprise-friendly, competitive economy has to be a priority. The TaxPayers’ Alliance report ‘Tax and entrepreneurship’ studied the effect of tax rates on entrepreneurship and concluded:
“While a range of factors including access to capital, regulations and entrepreneurs’ ‘animal spirits’ can affect the likelihood a new firm will be created, the tax system plays a critical role in whether someone will have the capital to set up a new firm and whether it will be worth their while to do so.”

Chief executive of Think London Michael Charlton said
“While the overwhelming majority of overseas executives in London are happy about doing business in London, they are closely observing key location factors such as corporate taxes, immigration and skills availability… We are taking their concerns seriously.”

And so should the government. A good way to start would be to consider the TaxPayers’ Alliance manifesto call for a cut in corporation tax to 15 per cent or less within 5 years.

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