The patent box, the government’s proposed preferential regime for profits arising from patents, will cost over £1 billion a year in lost revenue but will benefit only ‘a handful of firms’ according to the Institute for Fiscal Studies.
The IFS published its Green Budget forecast last week, in collaboration with Barclays Capital and Barclays Wealth. The policy, which will reduce the corporate tax rate on income derived from patents to 10% from April 2013, ‘is poorly targeted at promoting research, distorts the decision to invest in patentable technologies, and will add unnecessary complexity to the tax system,’ the IFS said.
‘Much of its cost will be deadweight, accruing to activities that would have occurred in the absence of the policy. The jury is still out on whether the policy is the best way to encourage firms to retain the real activity associated with mobile intellectual property in the UK.’
Consultation on the patent box, earmarked for Finance Bill 2012, closes on 22 February. George Osborne told British business leaders meeting at the World Economic Forum that the policy ‘will mean that Britain’s tax regime for intellectual property will be among the lowest in the western world’.
The IFS said the government should make clear where it sees the shape of the tax system in the medium term, and the purpose and direction of each of the major taxes.
‘The ways in which the Treasury and HMRC work together, and the extent of parliamentary scrutiny of tax policy, should be reviewed to improve the quality of tax policy making, it argued.
The government’s commitment to reduce the main rate of corporation to 24% will not be sufficient in the long term to create ‘a positive vision for UK plc’, according to the Institute of Directors.
The IoD’s ‘freebie growth plan’ published today includes a call for the government to articulate ‘as and when it is able’ an intention to move below the 24% rate. ‘The move towards a 20% rate would need to be financed by further public spending restraint, the IoD said.
‘The most significant and affordable change the Chancellor could make to the tax system would be to announce an end to the 50% top rate of income tax by the end of this Parliament,’ it added.
The patent box, the government’s proposed preferential regime for profits arising from patents, will cost over £1 billion a year in lost revenue but will benefit only ‘a handful of firms’ according to the Institute for Fiscal Studies.
The IFS published its Green Budget forecast last week, in collaboration with Barclays Capital and Barclays Wealth. The policy, which will reduce the corporate tax rate on income derived from patents to 10% from April 2013, ‘is poorly targeted at promoting research, distorts the decision to invest in patentable technologies, and will add unnecessary complexity to the tax system,’ the IFS said.
‘Much of its cost will be deadweight, accruing to activities that would have occurred in the absence of the policy. The jury is still out on whether the policy is the best way to encourage firms to retain the real activity associated with mobile intellectual property in the UK.’
Consultation on the patent box, earmarked for Finance Bill 2012, closes on 22 February. George Osborne told British business leaders meeting at the World Economic Forum that the policy ‘will mean that Britain’s tax regime for intellectual property will be among the lowest in the western world’.
The IFS said the government should make clear where it sees the shape of the tax system in the medium term, and the purpose and direction of each of the major taxes.
‘The ways in which the Treasury and HMRC work together, and the extent of parliamentary scrutiny of tax policy, should be reviewed to improve the quality of tax policy making, it argued.
The government’s commitment to reduce the main rate of corporation to 24% will not be sufficient in the long term to create ‘a positive vision for UK plc’, according to the Institute of Directors.
The IoD’s ‘freebie growth plan’ published today includes a call for the government to articulate ‘as and when it is able’ an intention to move below the 24% rate. ‘The move towards a 20% rate would need to be financed by further public spending restraint, the IoD said.
‘The most significant and affordable change the Chancellor could make to the tax system would be to announce an end to the 50% top rate of income tax by the end of this Parliament,’ it added.
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