UK should scrap corporation tax to boost global appeal, says think tank
The UK should consider scrapping corporation tax completely over time to massively boost its attractiveness to global business, a free-market think tank has said.
It comes as Ireland's competitiveness watchdog warned that while its 12.5% corporate tax rate remains competitive, it is under pressure internationally.
And it warned that Ireland needs to "respond in a forthright and confident fashion" to the challenges posed by Brexit.
The Adam Smith Institute in London said corporation tax in the UK should be abolished as part of a reboot of its tax system in the wake of the Brexit vote.
It said the move could be phased in, with an initial, dramatic cut to 12.5%, to bring the country in line with Ireland, then chop it to 6.25% and ultimately zero.
Northern Ireland is already set to have a 12.5% rate of corporation tax from April 2018.
Newly-installed Chancellor Philip Hammond has so far not committed to plans announced by his predecessor George Osborne to cut the corporation tax rate to below 15%. The Adam Smith Institute said there is a "false belief" that corporation tax is paid by companies.
"It is paid by the employees of companies, by their customers, and by their shareholders," the Institute said, in a note from its president, Madsen Pirie.
"Without corporation tax, businesses would have more money to distribute to shareholders in dividends, to increase the pay of their employees, and to keep prices keen for their customers.
"Although the government would forego the amount it receives in corporation tax, it would receive more income tax from the higher dividends to shareholders and from the increased wages to employees, and more Vat from the extra spending power the lower prices put into the pockets of customers."
The Institute said abolishing corporation tax would "make the UK a very attractive location for world businesses, and drive a real boost to economic growth".
Mr Hammond has pledged to do whatever is required to restore confidence in the economy.
He said the vote to leave the EU had "rattled confidence" and he will take "whatever measures" are needed to shore up the economy.
PwC NI chief economist Dr Esmond Birnie has told the Belfast Telegraph that Mr Hammond still embraces a low-tax regime.
"I think in the circumstances he will be attracted to any measures which demonstrate that the UK is open for business."
The Republic's National Competitiveness Council (NCC) has also said that high rents and house prices impact on the attractiveness of Ireland as a location for investment.