Scrap ‘inefficient’ corporation tax, think-tank urges government

Corporation tax should be scrapped and replaced with a tax on earnings distributed to shareholders because the current system is “hugely inefficient”, according to think-tank.

The report from the Institute of Economic Affairs argues there is a “clear and straightforward case” for abolishing the tax in the UK.

It suggests that while corporations are legally required to pay the tax the economic burden actually falls largely on workers because it leads to lower wages – the result of lower productivity caused by lower capital investment by firms in response to the tax.

It argues that the current system is “hugely inefficient” and costly to administer, both for public authorities and companies, and that it undermines long-term economic growth.

The report suggests that replacing corporation tax with a tax on earnings distributed to shareholders would reduce the incentives and opportunities for tax avoidance.