AFTER a long hiatus, it is interesting to see that the issue of lower taxation is being discussed in academic and political circles yet again. Last month, we saw the proposal, by Professor Patrick Minford, that one way of reforming the UK tax system would be to introduce a flat tax of 15% across people of all incomes and on all commodities. This, he believes, would encourage more people to work and encourage fewer people to seek to avoid paying taxes.
At the same time, the CBI called for lower business taxation, suggesting that the cumulative effect of post-1997 business tax rises was expected to hit £80 billion by 2010, while a KPMG survey of the UK's largest companies found that there were increasing concerns over rising business taxes. As a result, the tax burden for UK businesses has become higher than that of the US, and is set to overtake Germany and the Netherlands in the forthcoming tax year. Only France will have a higher business burden and, ironically, it has recently been reducing its corporation tax rate.
One could easily dismiss these issues as pre-Budget lobbying if it were not for the fact that other countries are beginning to realise that reducing taxation on the wealth creators in our society can actually generate more income for the public coffers and, crucially, increase investment in businesses to make them more competitive and innovative.
In this respect, envious eyes are yet again cast westwards towards the Republic of Ireland, which has had extremely low corporation taxes for the last 18 years. I was lucky enough to work in University College Dublin in the mid 1990s examining the competitive advantage of Ireland and therefore need little convincing of the importance of creating an enterprising, innovative and highly educated economy that is the envy of the developed world.
Analysts have put forward a range of reasons for the success of the Irish economy, including the massive investment in skills and education, the social partnership between business, government and trade unions, and membership of the European Union (along with the billions of pounds of Objective One money).
However, another key lesson from Ireland has been the clear need to reward the wealth creators in the economy, so that they can continue to invest and build their businesses, and create employment and prosperity in their local communities. It is surely no coincidence that with Ireland's business tax rates at only 12.5% as compared to the UK's main rate of 30%, the Emerald Isle remains the fastest growing economy in Europe.
On St David's Day, I spoke to one of Wales' leading businessmen who said that even a small reduction in corporation tax would benefit the ability to invest in his people and his business enormously. And I am sure there are hundreds of thousands of other entrepreneurs across the UK who feel exactly the same and who would support any move to address this issue. The increased investment that businesses themselves will generate through lower taxation would dwarf the publicly funded grant aid and expensive support that government can give to entrepreneurs to help them develop their companies.
I am therefore glad that the debate on lower business taxation within the UK has been initiated again. Indeed, I hope the vital lesson here for the UK is that if we can put the fiscal incentives into place to ensure that entrepreneurs can invest more of their profits on developing their businesses, then everyone will benefit from the eventual increase in tax revenues as businesses grow, as Ireland's massive increase in public expenditure has shown during the last 10 years.
At the same time, the CBI called for lower business taxation, suggesting that the cumulative effect of post-1997 business tax rises was expected to hit £80 billion by 2010, while a KPMG survey of the UK's largest companies found that there were increasing concerns over rising business taxes. As a result, the tax burden for UK businesses has become higher than that of the US, and is set to overtake Germany and the Netherlands in the forthcoming tax year. Only France will have a higher business burden and, ironically, it has recently been reducing its corporation tax rate.
One could easily dismiss these issues as pre-Budget lobbying if it were not for the fact that other countries are beginning to realise that reducing taxation on the wealth creators in our society can actually generate more income for the public coffers and, crucially, increase investment in businesses to make them more competitive and innovative.
In this respect, envious eyes are yet again cast westwards towards the Republic of Ireland, which has had extremely low corporation taxes for the last 18 years. I was lucky enough to work in University College Dublin in the mid 1990s examining the competitive advantage of Ireland and therefore need little convincing of the importance of creating an enterprising, innovative and highly educated economy that is the envy of the developed world.
Analysts have put forward a range of reasons for the success of the Irish economy, including the massive investment in skills and education, the social partnership between business, government and trade unions, and membership of the European Union (along with the billions of pounds of Objective One money).
However, another key lesson from Ireland has been the clear need to reward the wealth creators in the economy, so that they can continue to invest and build their businesses, and create employment and prosperity in their local communities. It is surely no coincidence that with Ireland's business tax rates at only 12.5% as compared to the UK's main rate of 30%, the Emerald Isle remains the fastest growing economy in Europe.
On St David's Day, I spoke to one of Wales' leading businessmen who said that even a small reduction in corporation tax would benefit the ability to invest in his people and his business enormously. And I am sure there are hundreds of thousands of other entrepreneurs across the UK who feel exactly the same and who would support any move to address this issue. The increased investment that businesses themselves will generate through lower taxation would dwarf the publicly funded grant aid and expensive support that government can give to entrepreneurs to help them develop their companies.
I am therefore glad that the debate on lower business taxation within the UK has been initiated again. Indeed, I hope the vital lesson here for the UK is that if we can put the fiscal incentives into place to ensure that entrepreneurs can invest more of their profits on developing their businesses, then everyone will benefit from the eventual increase in tax revenues as businesses grow, as Ireland's massive increase in public expenditure has shown during the last 10 years.
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