Main menu


UK business investment in G7 lowest despite corporate tax cuts, according to IPPR.Economy

featured image

The government said it had fallen to the lowest rate in a group of wealthy G7 countries, despite the cut in corporate tax, as ministers prepared £30bn in prizes aimed at businesses and high-income earners. I am warning the government.

The Public Policy Research Institute (IPPR) said a ‘race to the bottom’ of combined tax rates on corporate profits has failed to boost investment and economic growth in the UK over the past 15 years.

Prime Minister Liz Truss and her Prime Minister Kwasi Kwarten have argued that a cut in the corporate tax rate could unleash an investment boom in the UK and help push economic growth towards a target annual rate of 2.5%. Kwarteng will confirm details about the tax cuts at a “fiscal event” or mini-budget scheduled for Friday.

However, IPPR said the headline rate cuts from 30% in 2007 to 19% in 2019 engineered by former Prime Minister George Osborne did not spur increased private investment and accelerated economic growth. says.

Despite repeated tax cuts to the lowest rates in a century, the UK ranks among the G7 countries with the lowest private sector investment in national income, behind Italy and Canada. .

The following year, the UK was ranked 28th among 31 advanced OECD countries for business investment.

Research shows that corporate tax cuts implemented by successive Conservative governments have had little impact on business investment and economic growth, and the free market conservatives who have self-financed such tax cuts have shown little impact. It undermines the party’s claims.

A study by the Social Markets Foundation found that corporate tax cuts cost the public coffers a net cost of around £73bn between 2010 and 2018. In just one year, the increase in business investment outweighed the costs.

Business investment has leveled off in recent years amid concerns over Brexit, Covid and a difficult economic outlook. Official figures show investment levels remain 5.7% below pre-pandemic levels, but economists warn that rising energy costs and very high inflation will hold back spending.

Governments around the world pledged last year to end the race to the bottom of the corporate tax, depriving state coffers of revenue to fund vital public services and benefiting helpless multinational corporations. Nearly 140 countries, including the UK, have agreed to set a minimum tax rate of 15%.

The IPPR report will raise new questions over Kwarteng’s desire to scrap plans to raise corporate taxes to 25% starting in April, pushed by former prime minister Rishi Sunak.

The left-wing think tank has urged the government to consider alternative ways to boost investment and economic growth, saying targeted tax cuts for businesses and a commitment to an industrial strategy would have a greater impact.

George Dibb, director of IPPR’s Center for Economic Justice, said: Tax cuts are not a silver bullet to boost investment and growth. ”

Reducing the overall corporate tax rate is not seen as a priority for many business leaders.

“If the government is serious about increasing investment, it will listen to companies that want serious economic strategies to support growth, foster innovation and improve low productivity. Instead, we believe we can deregulate the previously unsuccessful tax cuts and path to growth,” Dibb added.