Cut corporation tax to boost growth, says think tank

01 February 2012

Business

Calls for corporation tax to be cut to boost business and revive Britain's economic growth have provoked a mixed response from printers.

A report published today by The Centre for Policy Studies has urged the government to cut corporation tax to as little as 10%, calling it the "only source of a viable economic recovery".

Chancellor George Osborne has pledged to cut the main rate of corporation tax to 23% from the current 26% by 2014, the lowest rate in the G7 group of economies; however, the think-tank’s report calls for the government to go further and cut it to 20% in this year’s Budget.

Printing.com chief executive Tony Rafferty said: "It’s difficult for UK-based businesses to compete with those that are based in low-tax countries. We pay 26% corporation tax, but if our head office was in Dublin, we would pay less than 15%. It’s like someone starting a 100m sprint from 17m down the track – I could beat Usain Bolt with that kind of headstart.

"The current corporation tax system favours large companies that can afford to move their intellectual property to tax havens. In this country, we need to develop high tech businesses that are based around intellectual property – but, unfortunately, that’s the easiest thing to move overseas."

Eclipse Colour financial controller Mike Kobuta added: "If the government did reduce corporation tax, it may help companies that are finding it difficult to get finance from the banks because they would get to keep more of their own money. I would welcome it."

But Technoprint managing director Mark Snee warned that a cut in corporation tax would likely be offset elsewhere.

He said: "There’s no way the government would cut tax without offsetting it in another area such as by reducing capital allowances, which I think would be worse because companies should be encouraged to invest.

"It’s better to pay tax on profits rather than have taxes that have to be paid whether you’ve made a profit or not, such as National Insurance."

The Centre for Policy Studies report follows Office of National Statistics figures, which revealed the UK economy shrank by 0.2% in the final quarter of last year, with the manufacturing sector contracting by 0.9%.