CORPORATION TAX and capital gains tax should be abandoned for SMEs in order to foster growth and cut the deficit, according to Lord Saatchi.
The advertising tycoon’s report for the Centre for Policy Studies noted 90% of UK businesses have fewer than 50 employees, with most having just five. Abolishing corporation tax for such firms and capital gains tax for their investors would drive GDP up to 3.1% inside five years, he claimed.
By way of comparison, official forecasts expect the economy to hit 2.4% growth in the same time, while public sector borrowing would drop by £2.8bn in 2018/19, compared to the Office for Budget Responsibility’s prediction of £1.1bn fall.
Around £43.8bn was raised through corporation tax in 2011/12, of which small companies on the small profits rate made up only £8bn.
Initially, Saatchi expects the policy to cost the public purse £10.5bn in lower tax receipts, but the capital SMEs retain as a result would allow them to compete more effectively with larger businesses, Saatchi argued.
He said: “This policy is designed to empower and liberate Britons, crushed by big corporations on the one hand and by the state on the other. I want people to be captains of their own ships and have more freedom.
“The answer is not more regulation but to increase competition, to challenge ‘cartel capitalism’ and to change the culture of Britain.”