Financial Times: Letter: Reduced corporation tax would pay for itself

From Mr Corin Taylor.

Sir, Your assertion that we should not "fool ourselves into thinking" that a lower rate of corporation tax will pay for itself is unduly conservative ("An unbalanced tax", August 28).

The TaxPayers' Alliance recently commissioned the Centre for Economics and Business Research to investigate the effects of a reduction in the main corporation tax rate to the 12.5 per cent Irish rate, phased over nine years. The simulations revealed that such a cut would not only boost gross domestic product, employment, fixed investment and household income, but after five years tax revenues would be higher - precisely the Laffer curve effect that you deny would occur.

These higher tax revenues would come in the form of increased income tax and value added tax receipts - as more people would have better-paying jobs - more than offsetting the reduction in corporation tax revenues. By the end of the simulation period, government borrowing would be almost £30bn lower than under the baseline scenario.

Across eastern Europe and beyond, economies and public finances have reaped the benefits of lower corporation tax rates, so much so that western European countries are now following suit. Is it too much to ask our Treasury to take note?

Corin Taylor,

Research Director,

The TaxPayers' Alliance,

London SW1H 9JA