The UK Government has been urged by the Centre for Policy Studies (CPS) to scrap the current 45p tax rate and reduce capital gains tax (CGT) in a bid to encourage a rise in the number of ‘super entrepreneurs’ throughout Britain.
According to a new report from the CPS, the number of people who earned at least $1bn through entrepreneurship – dubbed the Super Entrepreneurs – is miniscule in the UK compared with its US and Asian counterparts.
Dr Nima Sanandaji, an author of the report, believes the Work and Pensions Secretary was “conflating self-employment with entrepreneurship”.
The report suggests there is a “strong correlation between high rates of [these type of self-made people] in a country and low tax rates and a low regulatory burden”.
“The Coalition’s benefit reforms may well promote self-employment, which is a good thing in itself. But it is wrong to suppose that reducing benefits will do much for entrepreneurship,” said Sanandaji.
“In order to do that, the Coalition should turn its attention to cutting business and personal tax rates and taking the axe to red tape.
“The lesson is clear: to encourage innovation and entrepreneurialism, the government should do as little as possible beyond cutting taxes and regulations.”
The UK boasted 22 billionaire entrepreneurs between 1996 and 2010; the most famous of these includes Sir Richard Branson and inventor, James Dyson.
The CPS suggests that for every two million people, the UK produces one ‘super entrepreneur’, compared with the US which produces almost three ‘super entrepreneurs’ per 1.3 million.
“Cutting Capital gains would be a straightforward way to promote growth,” added Sanandaji.
“It would make entrepreneurship a more appealing choice for potential entrepreneurs, and would also increase the flow of funds into venture capital and entrepreneurial sectors.
“This would be particularly true for those countries with capital gains rates of 25 per cent or higher.”
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