Corporation tax cut ‘will not tempt business’

Leading economists are deeply sceptical that the cut of two percentage points
in the corporation tax rate announced in the Budget will act as a massive
incentive for businesses to invest in Britain.

‘There is not going to be much change in investment because of the rate cut.
When you take into account the changes to allowances, the changes are small and
will have little impact,’ Martin Weale from the National Institute of Economic
and Social Research, told a Commons Treasury committee evidence session.

Also before the committee, Bridget Rosewell, from Volterra Consulting, said:
‘I can’t say what the impact of the cut will be. If the tax system keeps on
going off in different directions, then businesses can make no long term

The criticisms of the tax cut are set to be put to the chancellor today, as
he too faces the committee.

Separately, Siemens Financial Services said that the increase in small
business tax could cause severe difficulties for smaller concerns.

Cash flow problems are the cause of most small business failures, which stand
at about 14,000 per year. Siemens believed the corporation tax hike would only
pile on the financial pressure. ‘It puts a restriction on cashflow, and in this
sector, cashflow is king,’ said Derek Ryan, Siemens director of special business
and corporate development.

Advisers poring over the budget announcements this week highlighted the fact
that the government has also, for the first time, placed a value on the savings
that will be generated by easing the administrative burden of tax.

HM Revenue & Customs said it wanted to reduce the administrative burden
of dealing with forms and returns by £337m. HMRC also set a target of reducing
the burden of dealing with audits and inspections by £35m over an eight year

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