Commenting on the 2014 International Tax Competitiveness Index, Head of Policy at the Adam Smith Institute, Ben Southwood, said:
It’s a nasty surprise to see that the UK ranks behind Mexico for tax competitiveness, and highlights the risk of the UK falling behind in the international tax competition stakes.
In contrast to small open economies like Estonia who are simplifying their tax systems to be as attractive to investment as possible, the UK looks in danger of the same institutional sclerosis that has bedevilled other major countries.
Thankfully these large economies—including France, Italy, USA, Japan—all rank even worse according to the index, except Germany who beats the UK by only one place.
But this narrow victory shouldn’t be cause for complacency. International competitiveness is important and helpful for spurring politicians into action, but nothing like the whole story.
Adam Smith Institute research from March found that approximately 60% of the burden of corporation tax fell on workers in the form of lower wages, while the rest weighed on investment—even ignoring the international impact.
This suggests that going further and faster with corporation tax cuts could deliver a cocktail of much-needed economic growth and wage hikes at the same time.
Notes to editors:
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The Adam Smith Institute is an independent libertarian think tank based in London. It advocates classically liberal public policies to create a richer, freer world.