CORPORATION tax should be slashed to 20% to jump start the economy, according to a paper published by the right-leaning Centre for Policy Studies think tank today.

In the research paper, tax lawyer David Martin argues introducing a lower rate from the start of the 2012/13 financial year would be a "quantum leap" which would stimulate companies to invest and grow.

The UK Government has agreed a 1% annual cut between now and 2014 which will see the rate fall from 26% to 23%.

A one-off drop to 20% would lead to a reduction in the £43.2 billion corpor- ation tax revenue of between £4bn to £8.5bn, but Mr Martin argues this could be met in other ways such as abolishing higher rate tax relief on pensions.

He also advocates the potential for further cuts but wants the overall tax system, including National Insurance, to be simplified.

Mr Martin said: "Without growth it is hard to see how the huge level of government is going to be paid down. If you cut corporation tax then on a pro-rata basis the Treasury collects less revenue, but if you have growing businesses it will get more tax revenues through income tax and VAT as well as building up the economy."