Budget2011: Osborne needs to do more for UK to be best tax regime in G20
Chancellor told he needs to do more than cut corporation tax for the UK to be the most competitive tax regime in the G20 group of countries
Chancellor told he needs to do more than cut corporation tax for the UK to be the most competitive tax regime in the G20 group of countries
THE CHANCELLOR cannot rely on low corporate tax rates alone if he wants to succeed in creating the most competitive tax environment in the G20 group of countries. George Osborne’s second Budget saw him reveal that corporation tax would be slashed by two percentage points from April this year to 26% with the rate falling to 23% by 2014-15.
The Plan for Growth document put out with Budget papers gives as its number one strategic aim the creation of the “most competitive tax system in the G20”.
Francesca Lagerberg, head of tax at Grant Thornton said the chancellor’s measures had made a good start, but issued a warning.
She said once the corporate tax rate reached 23% the UK would be competiting but issued a warning. “Is that all it’s about? No.”
She said: “The big thing that you hear from business is that they want stability and don’t want to find everything changes. And the big multi nationals are looking five years ahead.
“He needs to look beyond the term of this Parliament, if he is really serious about a growth agenda.”
The Budget offered a number of other measures – including improvements to the controlled foreign companies (CFC) regime; the expansion of enterprise investment schemes; the improvement in research and development tax credits; the extension of rates relief for small companies and changes to entrepreneurs relief – which offered tax reform for business.
The CFC regime affects the taxation of companies based in the UK that own overseas companies. There were amendments in the Budget but experts are still awaiting final reform proposals later this year.
However, Lagerberg’s thoughts were echoed elsewhere among tax experts.
Richard Mannion, national director of tax at Smith & Williamson said: “We’re still not as competitive as other European countries.”
Experts points to better treatment of intellectual property elsewhere in european. Other indicate that the big disincentive for overseas settling in the UK was not the corporate tax rate but other issues including the CFC regime and the income tax rate of 50%.
Kevin Hindley, managing director at A&M Taxand, said: “They have got to fix CFCs. That’s absolutely key. It’s one of the last flies in the ointment.”
He added: “We are beginning to look like pretty good holding jurisdiction.”
However, Hindley believes the corporation tax rates could go further if the government want to compete hard on that front. He believes the rate should go as low as 20%