Corporation Tax: avoidance, evasion or … abolition?

Those evil, greedy, American multi-nationals are back in the UK news  for obeying the law and arranging their affairs so as to pay exactly the amount of tax due but (can you believe it?) no more.  The weasel words du jour are “aggressive tax avoidance”.

Here’s a timely paper from the US National Bureau of Economic Research and highlighted by the Adam Smith Institute.  It models the impact of eliminating corporation tax completely (in the US) and finds, amongst other things, that elimination would yield a net benefit to all generations, both skilled and unskilled.  The paper notes that Ireland doubled its growth rate when it reduced its corporation tax from 50 per cent to 12.5 per cent.

Corporation Tax represents just 7 per cent of the UK’s total tax revenue.  Because of differences in the UK tax system compared to the US, the Adam Smith Institute’s Tim Worstall suggests  that eliminating the tax could well be positive (as opposed to just marginally negative as in the US model).