THE GOVERNMENT HAS been urged to cut taxes further if it needs to kick-start the economy by the International Monetary Fund and the Institute of Directors.
The IMF backed plans by chancellor George Osborne (pictured) to reduce the deficit, though said that a shift of emphasis would be needed “if the economy experiences a prolonged period of weak growth and high unemployment”.
It said that temporary tax cuts “are faster to implement and more credibly temporary than expenditure shifts and should be targeted to investment, low-income households, or job creation to increase their multipliers”.
The IoD’s report, Tax – the Weighty Burden 2011, said that the overall tax burden on businesses is “a lot higher than the corporation tax rates of 20% and 26%”. The actual burdens on small- and medium-sized enterprises are between 32% and 43% because of “employers’ National Insurance, business rates, road fuel duty, climate change levy and stamp duty land tax”.
The report concluded: “A reduction in the rate of corporation tax to 15%, or a reduction in the rate of employers’ National Insurance to 10%, would have a
much greater effect, and would benefit businesses of all sizes.”
The IMF’s report on the UK economy also said that “weakness in economic growth and rise in inflation over the last several months was unexpected”.
It forecast growth of 1.5% this year, down from its earlier prediction of 1.7%, increasing next year to 2.5%.
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