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Tories Look To Ireland For Inspiration On Corporate Tax

by Jason Gorringe,, London

09 December 2009

George Osborne, finance spokesman for the UK's main opposition Conservative party, has disclosed that, if victorious in next year's election, the party will deliver an emergency budget and seek a deep cut in the rate of corporate tax, referencing the success of Ireland's 12.5% rate, which helped to transform that country's economy.

In an interview with the Financial Times, Osborne championed a number of tax cuts, most notably a significant cut to the main corporate income tax rate, which currently stands at 28%. Whilst admitting that it would not be feasible to reduce the rate to as low as that seen in Ireland, he said that the party would also seek to overhaul controlled foreign company legislation to encourage multinationals to relocate to the UK.

"Ireland's had lots of economic problems but no one doubts that its corporate tax rate has been very successful at attracting businesses to the country,” Osborne told the paper. “I'm not saying we're going to get to 12.5%, I'm not saying we want to do everything the Irish do, but I think you've got to look."

Osborne observed that a low tax regime acted as "a kind of advert for the country," and said:

“I think there is a lesson to be learnt. Lower taxes and a simple tax code could increase the British tax-take.”

"Whoever wins the election has got to address this question, which is, how do we show the world that Britain is open for business?"

Osborne said that if the Conservatives were to gain power in the forthcoming elections it would present an emergency budget within 50 days, in order to begin establishing “the most attractive and competitive corporate tax regime of any major economy in five years' time.” Initially, he would seek to cut corporate tax to 25%, but would go further than this when the public finances permit.

In addition to the corporate tax proposals, Osborne observed that lower tax rates on intellectual property in Ireland, the Netherlands, and Belgium, had spurred research and development and encouraged foreign investment. If empowered, he said, the Tories would revise taxation on intellectual property and introduce a low rate of tax on profits derived from patents, brands and trademarks.

Whilst the Conservative party has enjoyed strong public support in recent months, the party's opinion poll lead has narrowed amid jibes from the Labour party that it remains "the party of the rich." Among Tory proposals that have been poorly received by less affluent taxpayers are the possible reversal of the 50% rate on the country’s highest earners, and the plan to increase inheritance tax thresholds.

The most recent opinion poll available, compiled for the Times and published on December 8, shows that the Conservatives have the support of 38% of voters, while the ruling Labour party trails on 30%.

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