Perma-bear Albert Edwards has called for UK corporation tax to be raised so the surpluses companies are sitting on can be used to boost the global economy, branding plans for tax cuts "stupid".
Perma-bear Albert Edwards has called for UK corporation tax to be raised so the surpluses companies are sitting on can be used to boost the global economy, branding plans for tax cuts “stupid”.
This week president Barack Obama offered to cut US corporation tax from 35% to 28% to eliminate tax code loop holes and free up cash for companies to spend on recruitment.
Meanwhile, UK Conservative Party politician Liam Fox said that to boost economic growth company tax should be cut in the country’s Budget being presented next month.
However, Edwards, global strategist at Société Générale, said taxes should be pushed higher as firms are not spending the surpluses they are already sitting on.
“Why do I regard the idea of cutting UK company taxes as laughably stupid at this time? It is simply the fact that UK corporations, like their US counterparts, are sitting on piles of excess cash with very little evidence they want to either spend or distribute these surpluses,” he said.
“It seems totally senseless to boost profits still further by lowering taxes in the hope that they will spend this on hiring and investing. If they had wanted to do this, there is most certainly no shortage of funds.
“Indeed, if the government really does want to reduce its bloated budget deficit, and if as appears to be the case, the UK (and US) corporate sector cannot find useful things to do with its cash mountain, they should be relieved of this troublesome burden via higher, not lower, corporate taxes.”
He also suggested a one-off levy on excess cash piles could be applied to corporates.
This article was first published on Investment Week