Reducing the tax on British firms – currently 27.9 per cent – and bringing it closer to the OECD average of 18.6 per cent would enable companies to increase wages, according to a paper by the TaxPayers’ Alliance.
A one percentage point rise in corporate tax leads to a fall in average wages of 0.52 percentage points, the report says. Based on that figure, a tax cut of five per cent would boost an average worker’s salary of £21,221 by £552 to £21,773.
The report suggests that higher levels of business tax are always passed on in higher prices to consumers, and lower wages to workers.
Corporation tax is due to be cut to 23 per cent over the current Parliament following measures set out by chancellor George Osborne in last month’s Budget.
Last week John Cridland, the head of the Confederation of British Industry, called for the tax on profits to be cut to 18 per cent to boost the UK’s global competitiveness. He also demanded the scrapping of the 50 per cent rate of personal income tax on earnings over £150,000.