Former Reagan adviser urges UK to adopt ‘full expensing’ as most cost-effective way to boost business
Ahead of the Budget, the Centre for Policy Studies is calling on the Government to adopt ‘full expensing’ to promote business investment - and address one of Britain’s most significant economic weaknesses.
Full expensing allows firms to immediately and entirely deduct the cost of any investment from their corporation tax bill.
In ‘Boosting Growth as the UK Leaves the European Union’, Stephen J. Entin - a Senior Fellow Emeritus at the Tax Foundation in Washington, DC, and former economic policy adviser to Ronald Reagan - argues that in a post-Brexit world, the UK must pay more attention to the international competitiveness of its economic policies.
Research in the USA has shown that full expensing can increase investment by 17.5% and wages by 2.5%. The CPS, Britain’s leading centre-right think tank, is urging the UK to adopt this approach, which would encourage firms to invest in better technology and facilities by making it easier for them to write off the costs.
This advice comes on the back of new data from the Office of National Statistics which shows that the growth in median income has stalled since 2017, growing by 0.4%, compare with 3.0% per year between 2013 and 2017. These figures - alongside Britain’s longstanding weakness in terms of business investment - reinforce the need for the Government to reform the tax system to promote growth.
Tom Clougherty, CPS Head of Tax, said:
“Full expensing would mean businesses investing more, leading to higher incomes and more tax revenue. The disappointing recent ONS figures underline the importance of the Government getting the economy firing on all cylinders. Ending the uncertainty around Brexit will help. But the government also needs to put robust pro-growth policies in place across Whitehall - with a particular focus on a pro-growth tax system.”
Stephen J. Entin, Senior Fellow Emeritus at the Tax Foundation, added:
"Now that the UK has left the EU, it needs to pay more attention to the international competitiveness of its tax policies. The ideal tax reform would be to adopt full expensing as a permanent feature of the UK tax system. This is by far the most cost-efficient way to boost business investment, wages, and economic growth through tax reform."