The chancellor of the exchequer, in an interview with the Financial Times, has revealed his intention to reduce the corporation tax rate below 15%, although he did not specify a date from which such a change would take effect.
The chancellor of the exchequer, in an interview with the Financial Times, has revealed his intention to reduce the corporation tax rate below 15%, although he did not specify a date from which such a change would take effect. This further reduction – the March Budget announced that the rate will be reduced to 17% in 2020 – would be a key feature in the chancellor’s plans for a ‘super-competitive economy’ in the wake of the UK’s withdrawal from the EU.
Reactions to the proposal have been mixed. Whilst some business commentators see it as a step in the right direction, others feel that a further 2% reduction would not have a significant effect. Sara Luder, a partner at law firm Slaughter and May, told the Financial Times: ‘When I advise clients who are comparing the UK with other popular holding company jurisdictions, the corporate tax rate is no longer a factor.’
Luder’s comments were echoed by Robin Walduck, tax partner at KPMG. ‘Will this latest cut really make a difference? Whilst from a policy perspective it may help make the UK a “super-competitive economy”, a reduction in rates will likely not be enough on its own to drive FDI’.
‘Companies want stability, predictability and certainty, both in economic (including tax) and political terms,’ Walduck said. ‘Whilst the current political and economic volatility prevails and uncertainty over a post-Brexit UK remains, companies may well be reluctant to invest in the UK.’
According to Reuters, a leaked memo from Pascal Saint-Amans, director of tax policy at the OECD, suggests that aggressive cuts to corporation tax would ‘turn the UK into a tax haven type of economy’.
Steve Edge, tax partner with Slaughter and May, giving evidence in June to the Treasury select committee’s inquiry into UK tax policy and the tax base, described the ‘tendency, which we have seen in Europe and are seeing in the US at present, that jurisdictions that have a tax rate of less than 15% on corporate profits should be blacklisted in some way’.
Former head of the World Trade Organization, Pascal Lamy, in an interview with the BBC, described the proposed move as ‘tax dumping’, which the EU might see as the start of ‘Brexit’ negotiations.
Elizabeth Bradley, partner and head of corporate tax at the law firm BLP, observed that: ‘Cutting the corporation tax rate below 15% may be challenging, both domestically and in the context of our negotiations with the EU.’
However, she welcomed Osborne’s plans to put tax policy at the heart of building a ‘super-competitive economy’ post-Brexit. Bradley called for more could be done to enhance the competitiveness of the UK tax system, including delaying the implementation of proposals to limit tax deductions for interest. ‘It is imperative that we put a brake on our implementation of the OECD’s BEPS project until the terms of our withdrawal from the EU become clearer,’ she added.
The chancellor of the exchequer, in an interview with the Financial Times, has revealed his intention to reduce the corporation tax rate below 15%, although he did not specify a date from which such a change would take effect.
The chancellor of the exchequer, in an interview with the Financial Times, has revealed his intention to reduce the corporation tax rate below 15%, although he did not specify a date from which such a change would take effect. This further reduction – the March Budget announced that the rate will be reduced to 17% in 2020 – would be a key feature in the chancellor’s plans for a ‘super-competitive economy’ in the wake of the UK’s withdrawal from the EU.
Reactions to the proposal have been mixed. Whilst some business commentators see it as a step in the right direction, others feel that a further 2% reduction would not have a significant effect. Sara Luder, a partner at law firm Slaughter and May, told the Financial Times: ‘When I advise clients who are comparing the UK with other popular holding company jurisdictions, the corporate tax rate is no longer a factor.’
Luder’s comments were echoed by Robin Walduck, tax partner at KPMG. ‘Will this latest cut really make a difference? Whilst from a policy perspective it may help make the UK a “super-competitive economy”, a reduction in rates will likely not be enough on its own to drive FDI’.
‘Companies want stability, predictability and certainty, both in economic (including tax) and political terms,’ Walduck said. ‘Whilst the current political and economic volatility prevails and uncertainty over a post-Brexit UK remains, companies may well be reluctant to invest in the UK.’
According to Reuters, a leaked memo from Pascal Saint-Amans, director of tax policy at the OECD, suggests that aggressive cuts to corporation tax would ‘turn the UK into a tax haven type of economy’.
Steve Edge, tax partner with Slaughter and May, giving evidence in June to the Treasury select committee’s inquiry into UK tax policy and the tax base, described the ‘tendency, which we have seen in Europe and are seeing in the US at present, that jurisdictions that have a tax rate of less than 15% on corporate profits should be blacklisted in some way’.
Former head of the World Trade Organization, Pascal Lamy, in an interview with the BBC, described the proposed move as ‘tax dumping’, which the EU might see as the start of ‘Brexit’ negotiations.
Elizabeth Bradley, partner and head of corporate tax at the law firm BLP, observed that: ‘Cutting the corporation tax rate below 15% may be challenging, both domestically and in the context of our negotiations with the EU.’
However, she welcomed Osborne’s plans to put tax policy at the heart of building a ‘super-competitive economy’ post-Brexit. Bradley called for more could be done to enhance the competitiveness of the UK tax system, including delaying the implementation of proposals to limit tax deductions for interest. ‘It is imperative that we put a brake on our implementation of the OECD’s BEPS project until the terms of our withdrawal from the EU become clearer,’ she added.
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