IoD calls on government to cut corporation tax to 15%

THE Institute of Directors (IoD) has today called on the UK government to slash corporation tax to 15 per cent by 2020, bringing the UK much closer in line with rates charged in the Republic of Ireland.

The radical move could potentially eliminate any gaps expected by the Scottish Government, which is campaigning to have the power to control and potentially gain advantage by reducing the rate of corporation tax in Scotland.

The UK coalition government has already cut the main rate from 28 per cent to 26 per cent effective from May, and has pledged further reductions to 23 per cent by 2015. This would give the UK the lowest business tax rate in the G7, but the IoD has said this was “not enough”.

The IoD has demanded a much deeper cut as part of its growth plan, which lists the lower rate as one of 15 “aggressive” proposals which the business group says “could make the UK one of the most competitive advanced economies in the world by 2020-25”.

In his first day as IoD director general, Simon Walker has also called on the Bank of England inject £50 billion into the UK economy in a second round of quantitative easing at the next monetary policy committee meeting.

Walker said: “No aspect of economic policy is more important than returning Britain to a growth trajectory. Without the belief that UK economic growth is expanding, confidence will wane, international investment will dwindle and British consumers and taxpayers will be left picking up the crumbs at the tables of faster growing competitors.

“The government’s deficit reduction programme is a step in the right direction – but it must go faster and further before the economy is on track and prosperity returns.”

The business group has also attacked European employment legislation and has called for the UK to repatriate some of its powers given over under EU treaties. The IoD points to nine major employment law changes, including “raising the bar” for strike actions and exempting micro businesses, which have ten employees or fewer, from a number of EU directives.

The British Chamber of Commerce has backed the IoD’s proposals for the reform of employment tribunals. In a report also published today, the BCC has claimed that small businesses in particular are “held to ransom” by the tribunal system.

In a survey over 2,000 small businesses, the BCC found that one in five had been threatened with an employment tribunal and half found rules around dismissal burdensome. The BCC said that 60 per cent of SMEs would be hiring more people except that “their ambitions to grow are often severely frustrated by the difficulties of complying with employment regulation”.

The BCC’s report said that when faced with a tribunal, a large proportion – 37 per cent – of small businesses opt for settlement which often costs less than defending a claim. The BCC claims this encourages spurious claims and undermines the cases of those employees who have a fair claim to compensation.

John Longworth, director general of the BCC, said: “We recognise the government has taken some steps towards improving the tribunal system, but with new agency rules, parental rights and pensions changes all coming down the track before 2015, the net result for our small firms will be negative. The more flexible the employment market is, the more jobs will be created. Business owners want to recruit, so the government must provide a simplified and stable regulatory environment to encourage them to do so.”