Directors call for cuts in business tax

The Institute of Directors (IoD) is pressing Chancellor George Osborne to give the UK the lowest corporate tax rate in the world by 2020.

The lobby group said that by committing to future tax cuts for companies and high earners in next week's Budget, Osborne would "kill the growing perception that the UK is a high tax economy".

The IoD is calling for four "easily manageable" changes to the tax system, mainly to be introduced after the current austerity measures have been implemented.

It wants the Chancellor to abolish the 50 per cent top rate of income tax by 2014-15, reinstate the personal allowance on earnings above 100,000, exempt from capital gains tax "entrepreneurial investments" such as profits from shares in new companies, and cut corporation tax from the current rate of 24 per cent to 15 per cent by 2020.

Miles Templeman, director-general of the IoD, said: "Since there is little money in the Treasury's coffers, many people are assuming that there's not much George Osborne can do to kick-start economic activity. They couldn't be more wrong.

"Now is the time for the government to signal in the strongest possible terms its determination to make the UK one of the most tax competitive countries in the world."

He said corporation tax was one of the most dynamic areas of the tax system, and deep cuts in rates could transform business behaviour and raise more tax revenue in the long term.

The IoD says the proposed cuts would have little or no effect on the UK's finances before 2015. After that, the cost would be "easily manageable, providing there is restraint in the growth of public spending".

It said the most expensive measure, the corporation tax cut, would cost the UK government 9 billion a year, but that would be at least partly offset by a "dynamic impact on GDP growth".