Resurgent Tories would cut corporate tax

By Deborah Haynes and Matt Falloon

LONDON (Reuters) - The Conservatives pledged on Monday to cut the corporation tax rate by three percentage points if elected, raising the stakes ahead of Chancellor Gordon Brown's budget this week.

The Conservatives are currently well ahead in the polls and could win the next election expected by 2009 when Brown is expected to have assumed leadership of the ruling Labour party from Prime Minister Tony Blair.

Conservative economic spokesman George Osborne said the cost of the proposed reduction in corporation tax to 27 percent from 30 percent would be revenue neutral, paid for by scrapping complicated tax relief schemes for firms.

Osborne dared Brown to use his 11th -- and most probably last -- budget on Wednesday to introduce the cut in headline corporation tax.

"The detailed work we have done for more than a year shows that a 3 pence (in the pound) cut in headline corporation tax rate could be paid for by scrapping some of the complex reliefs and reducing expensive allowances," he said.

Brown, who is expected to succeed Prime Minister Tony Blair in the coming months, is under pressure to lure back voters with this week's budget but most economists say the finance minister has little room for manoeuvre for cutting taxes.

Nonetheless, business groups would like to see corporation tax slashed to 25 percent to improve competitiveness.

"I hope that the Chancellor takes action on Wednesday to reduce the burden of tax on business and increase the attractiveness of the UK as a place to invest," said David Frost, Director General of the British Chambers of Commerce.