More than 100 business leaders have written an open letter to the Daily Telegraph declaring support for a Conservative-led Government, saying that the move to lower corporation tax to 20 per cent, which comes into effect this month, will boost the economy.
The senior executives, who include former Dragons’ Den star Duncan Bannatyne and Baroness Brady from The Apprentice, and who collectively employ more than 500,000 people, say that a Labour Government would ‘threaten jobs and deter investment’ in the UK.
The letter praises Chancellor George Osborne’s decision to cut corporation tax and warns that a change in course would put the economy at risk, citing the fact that Labour pledges to reverse the cut in the tax if they were to win the General Election in May.
Shadow Chancellor Ed Balls and Labour leader Ed Miliband have dismissed the letter, saying that they would prioritise lower business rates for small firms and would curb “exploitative” zero-hours contracts instead.
Meanwhile, there are fears that plans by Labour to encourage businesses to seek equity funding over debt funding could affect the UK’s corporate tax yield. In a plan that resembles one operating in Belgium, the party says it would make equity funding more attractive through a system of tax reliefs known as ‘allowances for corporate equity’, which provide incentives for firms to invest in shares.
However, critics say that the impact of the measure could see a reduction in corporation tax yields, which the party says could be offset by an increase in the rate of corporation tax by up to six and a half percentage points from its current level of 20 per cent without breaking its manifesto pledge to maintain the most competitive rate in the G7. Currently the G7 country outside the UK with the lowest corporation tax rate is Canada, with a rate of 26.5 per cent.