Corporate tax cuts don’t work

They create few jobs and the investment they attract is footloose. Corporate tax rates are being slashed from 28 per cent in 2010 to 20 per cent in 2015, and a couple of other wheezes are turning Britain into a corporate tax haven to compete with Ireland or Luxembourg.

The World Today
2 minute READ

John Christensen

Director, Tax Justice Network

Nicholas Shaxson

Author of Treasure Islands, a book about tax havens

In a speech at the Tory party conference, George Osborne, the Chancellor, roused his supporters with a claim that by 2015 Britain would have the ‘lowest, most competitive business taxes of any large country in the world’. Osborne’s statement was hardly controversial: entire political classes in many countries aspire to a competitive tax system. What is astonishing about this aspiration is that the whole competitiveness agenda is an intellectual house of cards founded on fallacies and extensive lobbying.

Idle cash piles
Consider this first. When countries cut taxes on capital to tempt the world’s money, and other countries follow suit, the process is a macro-political phenomenon bearing no resemblance to the microeconomic phenomenon of market competition between firms.

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