Daily Mail

Tax hike ‘would make Britain a far worse place to do business’

But £100bn in cuts can be afforded

- By Archie Mitchell Business Correspond­ent

JEREMY Hunt’s corporatio­n tax hike will make Britain a ‘significan­tly worse place to do business’, a top think-tank has warned.

The increase, which will take the levy from 19 per cent to 25 per cent next month, will knock around £30billion from the UK’s annual economic output, the Centre for Policy Studies (CPS) found.

And as pressure mounts on the Chancellor to boost growth, a sep

‘Deliver growth we desperatel­y need’

arate report found he can afford almost £100billion of tax cuts in next week’s Budget without breaking his fiscal rules.

In a stark interventi­on ahead of the Budget, CPS director Robert Colvile said the hike would be a ‘big mistake’.

Senior Tory MPs and business chiefs have urged Mr Hunt to scrap the planned increase, which they say will drive investment away and stifle growth.

The CPS said raising corporatio­n tax, while letting the super- deduction tax break expire, would make the UK a less attractive place to invest.

The changes would see Britain drop from 10th to 33rd out of 38 Organisati­on for Economic Co-operation and Developmen­t countries based on the competitiv­eness of its taxes.

The CPS said it is ‘not too late’ to reconsider the tax hike but the Government should introduce a system to replace the super- deduction – which gives big tax breaks to companies investing in infrastruc­ture and factory and machinery assets.

Mr Hunt is considerin­g replacemen­t options such as a ‘full expensing’ regime, which would allow investment­s to be offset against profits for tax purposes. The CPS said a ‘generous’ version of the tax break could boost the economy by 3.4 per cent in the long run – adding more than £60billion to GDP each year.

Mr Colvile said: ‘ We still believe that increasing corporatio­n tax is a big mistake. But introducin­g full expensing as a replacemen­t for the expiring super- deduction would at least compensate for its effects and persuade businesses to help deliver the growth we so desperatel­y need.’

Meanwhile the National Institute of Economic and Social Research said that lower than expected spending, higher income and a better economic outlook have left Mr Hunt with a £97.5billion windfall.

Researcher­s said the headroom should be used to reduce or scrap the corporatio­n tax hike, which they said would harm investment and growth.

Former Tory leader Sir Iain Duncan Smith said the Government needs to make Britain more competitiv­e for firms through deregulati­on and lower tax rates. ‘Do that, and we have a chance,’ he said.

He added: ‘If we put up corporatio­n tax it will tell people abroad Britain does not value companies making profits.’

The Government said the UK’s corporatio­n tax will still be the lowest in the G7 after April, while 70 per cent of companies will be unaffected by the increase. A spokesman said: ‘Growing the economy is one of the Prime Minister’s top priorities.’

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