I write in response to the letter from Aidan Ruff about the Laffer Curve, (Northumberland Gazette, May 11).
The Laffer Curve does not suggest that in all cases lower corporation tax results in higher receipts for the Government. It suggests that beyond a certain point, any further increase in tax rate will be counter-productive for raising further revenue. It is often disputed where this point is, but some investigations suggest it is as high as 70 per cent.
In other words, raising corporation tax in the UK from 17 per cent to 26 per cent would lead to an increase, not a decrease, in revenue for the Government. We are still on the upwards part of the curve where increase in tax equates to increase in revenue. The independent Institute for Fiscal Studies agrees.
As for suggesting that increasing corporation tax would harm enterprise and business, if so, how come Germany has a much higher GDP per capita than the UK when it has a higher corporation tax rate of 35 per cent, as does the Netherlands (25 per cent) and Norway (24 per cent)? There is no evidence to suggest that companies do not invest in these countries because of their tax rates.
Germany’s industrial strength is built upon its excellent education system that its Government invests in. It doesn’t have teachers warning that progress would stall and academic standards would decline if schools continued to come under unacceptable levels of financial pressure. Yet, we do in the UK.
And where else does Germany invest its corporation tax revenue? Health, around 50 per cent more per head of population. That’s why Germany has four times as many hospital beds per head of population than we do. That’s why Germany didn’t have 2.5 million people waiting more than four hours in A&E last year like we did.
So I say, let’s follow the lead of our economically more successful neighbours and increase corporation tax, and invest the additional revenue in the areas that need it most: Health and education.
Name and address supplied