Chancellor George Osborne reaffirmed his commitment to cutting corporation tax in an effort to boost the economic competitiveness of British firms.
In his speech to the CBI annual dinner in London last night, he said that the final Lib-Con coalition agreement - to be published today - would include a commitment to “lower and simpler” corporate tax rates.
He said that he intended to use his emergency budget on June 22nd to set out a “five year road map” for a “big reform” of the corporation tax system.
Mr Osborne was under pressure to reaffirm his tax cutting credentials after agreeing to a hike in capital gains tax as part of the deal hammered out with the Liberal Democrats.
The promise of initial cuts in the headline rate of corporation tax from 28p to 25p, and in the small companies rate from 21p to 20p, was a key plank of the Conservatives’ general election manifesto.
There was speculation that it had been abandoned after there was no mention of it in the preliminary coalition agreement published last week.
But Mr Osborne said: “I want corporate tax reform to be a priority for this government, and I can confirm that the final coalition agreement that we will publish will commit us to lower and simpler corporate tax rates.
“At the budget I want to set out a five year road map for a big reform of corporation tax.” He said that the final document issued by the two parties would state: “We will reform the corporate tax system by simplifying reliefs and allowances, and tackling avoidance, in order to reduce headline rates.
“Our aim is to create the most competitive corporate tax regime in the G20, while protecting manufacturing industries.” He offered no detail of the scale or timing of the planned cuts. Aides said that further details would have to await the budget, although they insisted the “direction of travel” was clear from his comments.
Mr Osborne, making his first setpiece speech as Chancellor, also reaffirmed another manifesto commitment to simplify the Controlled Foreign Companies rules in order to make the UK a more attractive location for multinationals.
After his dire warning earlier this week of the dangers of failing to tackle Britain’s record £163 billion deficit, he sought to strike an upbeat note about the prospects for the UK as the world emerged from recession.
He said that the rapidly growing middle classes across southern Asia and South America offered huge opportunities for British firms to export goods and services around the world.
“As a country we have spectacular opportunities ahead of us - we have reasons to be cheerful. There is a prize that is there for the taking,” he said.
He said that his “guiding principle” as chancellor would be to do everything that he could to support a private sector recovery.
The coalition’s commitment to paying down the deficit meant that firms would be able to operate in the “sunlight of confidence and stability”, he said, rather than living “in the shadow of debt and uncertainty”.
PA