TaxCorporate TaxExit tax ruling could harm UK

Exit tax ruling could harm UK

Business leaders have demanded that the government improve UK competitiveness following a decision by the European Court of Justice to end so-called 'exit taxes'. This could make it much cheaper for companies to relocate away from Britain.

Link: Exit tax may prompt exodus

The ECJ’s advocate general ruled that exit taxes were anti-competitive and in contravention of the EC treaty. Exit taxes discourage companies from leaving a country’s shores by charging a 30% capital gains tax if they decide to migrate.

A CBI spokesman told Accoutancy Age members had been forced to hold urgent meetings to discuss the implications of the ruling. ‘The answer is to make the UK so tax competitive that companies will not want to leave,’ he said.

CBI director general Digby Jones called on the chancellor to improve the UK as an attractive business centre: ‘We badly need a Budget that gets behind business and maintains the UK’s reputation for having the best business environment in Europe.’

Christopher Morgan, international tax partner at KPMG, said companies that had left British shores could already defer the CGT levy, but nonetheless it offers ‘another indication that we need to have rules that are competitive, so that companies will want to do business in the UK’.

For exit taxes to become illegal, the advocate general’s opinion would have to be fully accepted by the ECJ.

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