Corporate tax cut won’t boost economy, says IPPR

She added: “We should base our tax policy on what is going to help our country succeed, what is going to generate this economy that benefits everyone in our country. What I don’t buy is the idea that corporate tax cuts don’t help people in general.

Truss said she was “ready to be unpopular” outlining her growth plans. But Dibb said: “Tax cuts are not a magic bullet to increase investment and growth. In fact, despite having some of the lowest corporate tax levels, business investment in the UK is the lowest in the G7.

The corporate tax rate was reduced from 30% in 2007 to 19% in 2017, where it is still in effect today. Business investment in the UK fell at the lowest rate of any G7 economy in 2019, behind Italy and Canada.

The UK also “regularly” ranks among the lowest investment rates among developed countries in the OECD (the Organization for Economic Co-operation and Development). In 2020, the UK ranked 28th in business investment from 31 member countries.

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Dibb added: “If the government really wanted to boost investment, it would listen to companies that want a serious economic strategy to support growth, spur innovation and boost our low productivity. Instead, he thinks he can cut taxes and deregulate his way to growth, which has failed before.

The IPPR calls on the government to “engage in an appropriate and far-reaching strategy of enlightened policy that aims to increase investment and productivity by removing obstacles to growth and promoting investment opportunities”.

Experts are also urging ministers to take a whole-of-government approach to growth, stop “cutting and switching” between policies and target tax cuts to prevent them being too costly.

Labor MP Margaret Hodge, who is also Chair of the Anti-Corruption Responsible Taxation APPG, said on Twitter: “A big week is coming for Trussonomics and early signs don’t look good.

“A new study by the IPPR shows that reducing corporate tax is unlikely to lead to more private sector investment. In 12 years of Conservative rule, we have had the lowest corporate tax rate in the G7 and often the lowest investment.

Alex Cobham, Managing Director of the Tax Justice Network, added: “Awesome new work from IPPR today, confirming what every policy maker and commentator must surely know by now: corporate tax cuts do not stimulate investment or growth (but costs income and exacerbates inequalities).

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