Tax on UK companies should be cut still further, an influential think tank has argued.
Chancellor George Osborne has previously pushed through policies to ease the tax burden on businesses, sometimes attracting criticism that he is sacrificing billions in potential revenue.
But the Institute for Fiscal Studies (IFS) has defended the strategy, arguing that far from being a “tax break for big business”, reducing liabilities also benefited the workers.
In fact, the think tank is now urging the Chancellor to go further, arguing that fiscal incentives could help stimulate investment and equity financing.
An IFS spokesman said: “It has long been recognised that corporate income taxes can distort incentives in a number of harmful ways, and they are thought to have a particularly damaging effect on economic growth.
“The income and activities of multinationals are particularly mobile and responsive to the tax rate.”
In its analysis, the think tank considered several other issues relating to corporate tax, including how ministers can look to reduce avoidance and the ramifications of devolving powers to set levies to Northern Ireland.
“Despite a flurry of activity in the area of corporate tax policy over this parliament, challenges remain,” concluded the report.
