Replacing corporation tax with an extra value added tax is one of the options
put forward by independent think-tank, the
Institute for Fiscal
Studies (IFS), to resolve the growing difficulties HM Treasury face when
taxing international businesses.
The proposal is part of a submission to an ambitious review of the tax system
undertaken for the IFS, the Financial Times reports.
Researchers from IFS and the UCLA at Berkeley said the growing mobility of
capital and profits had created increased tax competition, making it very
difficult to tax corporate income where it was earned or where investors lived.
A ‘radical’ alternative designed to reduce avoidance and distortions to
investment would be to tax the value added by business, with exemptions for the
cost of labour, by increasing VAT and cutting national insurance contributions.
However, they warned this reform might be hampered by EU rules and the risk of
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