A Global Minimum Corporate Tax could derail Levelling Up

The Adam Smith Institute’s new report Levelling Down reveals why A Global Minimum Corporate Tax could derail Levelling Up

• A new report by the Adam Smith Institute’s Senior Fellow, Dr. Tyler Goodspeed, finds that the UK’s decision to rush the implementation of a global minimum corporate tax rate will undermine the Government’s Levelling Up agenda.

• Proposals undermine key areas of UK tax policy including investment zones and free ports, business tax credits, and accelerated cost recovery for new capital investments - which makes up over one-third of all UK investment.

• The UK’s early implementation of global minimum tax rules is fraught with risk and the Government should carefully scrutinise current proposals to limit potential economic damage. 

• It will result in the Levelling Down of the UK rather than the Levelling Up.

A new report from the Adam Smith Institute (ASI) and authored by Dr. Tyler Goodspeed finds that the Government's Levelling Up agenda is at serious risk of being derailed by the decision to rush the implementation of a Global Minimum Corporate Tax rate.

There are two important weapons for the UK's Levelling Up agenda: freeports and investment zones. The Prime Minister wants to use these to incentivise firms to set up shop in run-down regions and coasts in the UK that could use the investment and jobs. Incentives include tax credits and breaks, subsidies, tariff-free zones for imports, the lowering of national insurance contributions when hiring new staff, among other attractive levers.

This report finds clear evidence that the structure of this global tax agreement directly undermines the Levelling Up agenda and hurts the competitiveness of key UK industries by tying the hands of the Government.

Former Secretary of State, the Rt. Hon. Jacob Rees-Mogg MP, in reaction to the Adam Smith Institute’s new report:

“Tax competition between countries keeps rates low and increases prosperity. Agreeing high rates among a cabal of developed nations will keep the world poorer.” 

The paper recommends the following:

1. The UK’s early implementation of global minimum tax rules is fraught with risk, and with limited upside. Policymakers should carefully scrutinise current proposals to limit their potential economic damage, damage which will disproportionately impact the poorest regions at most need of Levelling Up, not Levelling Down.

-ENDS- 

Notes to editors:  

• For further comments or to arrange an interview, contact Connor Axiotes, connor@adamsmith.org | 0758 477 8207.

• Dr. Tyler Goodspeed is the Kleinheinz Fellow at the Hoover Institution at Stanford University, and a Senior Fellow at the Adam Smith Institute. From 2020 to 2021 he served as Acting Chairman of the U.S. Council of Economic Advisers, having been appointed by the President as a Member of the Council in 2019. Before joining the Council, Dr. Goodspeed was on the Faculty of Economics at the University of Oxford and was a lecturer in economics at King’s College London. He received his B.A., M.A., and Ph.D. from Harvard University; and he received his M.Phil from the University of Cambridge, where he was a Gates Scholar.