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Corporation Tax Cuts; positive or negative?

15 July 2014

calculator and desk April Newslestter

The Financial Times published an article on 9 July 2014 explaining that ‘Corporation tax cuts cost UK over £5bn a year’.

haleys Managing director Tim Haley disagreed with this. Tim believes the reduced rate will encourage investments leading to further indirect taxes for the government coffers.

Writing a letter in direct response to the Financial Times article, Tim commented:

"I would disagree. Whilst accepting that the fall in CT rates will reduce CT revenue, what about the myriad of other taxes that enterprises help generate for the UK? Low CT rates attract inward investment and encourage entrepreneurs. Increased employment and sales result in an increase in income tax, national insurance and VAT revenues – these taxes alone form the majority of government revenues. But additionally growth leads to more tax revenue from rates, insurance premium tax, stamp duty land tax, and fuel duties.

Factor in to the equation the government savings from hiring employees who previously received state benefits and the extra taxes suppliers of expanding businesses pay – as they expand, and I am confident you will find that growth yields more tax revenues overall.

The key is stimulating growth and low CT rates do just that. That £5bn ‘cost’ is really an investment in the UK economy that will pay enormous dividends."

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