Should CT rates be lowered?

The Times letters page, often a good source of interesting comment about tax, today leads with a discussion about whether corporation tax rates should be lowered.

There seems to be a consensus building around a lower CT rate, and Lord Jacobs, the Lib Dem peer, a chartered accountant and a former taxation adviser to the Liberal party, as it then was, says exactly that. If special reliefs were eliminated and normal accounting profits taxed, the rate could be reduced to 23%, he says.

Kevin Phillips, a tax partner at Baker Tilly, makes the point that while UK CT rates have remained static, the world outside has become more competitive.

Interestingly, though, the most compelling argument comes from the opposing side of the debate, from Graham Gudgin, an economist and former adviser to the Northern Ireland First Minister.

Gudgin says that Ireland’s CT rate has been low for 30 years, and that the uplift in the Irish economy is unrelated. Ireland essentially makes the most of profits that would otherwise be taxed in the UK or the US. Ireland is no big problem for the US, he says, but if the UK were to follow suit, the US would be sure to act in response given its size.

He adds also that Ireland’s GDP is overstated as a result, since much of the profits from such activity do not belong to Irish citizens.

Food for thought for the Tories, pondering a cut in the tax on company profits, and Gordon Brown, who might now be seeing the move as a useful opportunistic attempt to steal the Tories’ clothes.

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