9 reasons why George Osborne was right about cutting corporation tax

13 July 2016

George Osborne, the now former Chancellor of the Exchequer, went down fighting for the UK’s business agenda. He was recently in New York, spreading reassurance that the UK is not “withdrawing from the world”. Was this a “Norman Lamont-style singing in the bath” moment? Despite campaigning to Remain, Osborne was not slow to seize the opportunities that Brexit presents for the UK to become more competitive on corporate taxation. His aspiration was a 15% corporate tax rate, and “preferably lower”.  Here’s why that could be a really good idea.
Osborne’s pitch was ostensibly to large corporations in US and Asia, but the veiled threat to the EU27 will not be lost on them: something along the lines of ‘we need a good deal in the Brexit negotiations or we will put a very large tax haven 20 miles offshore’. Cutting corporation tax is a delicate topic within the EU. Indeed, it was suggested by some parties that Ireland should increase its corporate tax rate as a condition for its financial bailout in 2010.
However, cutting corporation tax is an economically sound idea, as well as a politically appealing one. We would go further: here are 9 reasons why the UK should consider becoming the first major economy to cut corporation tax to zero:

Of course, there’s no easy way to administer an alternative tax and corporation tax is popular with the electorate who see it as taxing the faceless corporations and ‘fat cats’. It may give rise to numerous companies that are little more than a name plate making no contribution to the economy, and it may be possible for people to register as companies to avoid paying income tax; but there are a number of good points for the new Chancellor of the Exchequer, Philip Hammond, to consider if he does continue to cut the corporation tax rate.
Were the UK to eliminate corporation tax, then there is a good chance that there would be an influx of companies into the UK. Ireland offers a ready example of the responsiveness of international business to a favourable tax environment. Cutting corporation tax is also a good way to disincentivise international relocation. Post-Brexit, the UK still has a strong hand in the poker game of international location – decent infrastructure, the language of business and education, a skilled workforce, the time zone, a respected legal system, as well as rich cultural landscape. Add in the lowest corporate tax rate in the developed world, and we are on to a winner.

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