THE DEBATE AROUND the UK’s tax climate in both politics and the media could harm its otherwise attractive regime, KPMG has warned.
Although large businesses perceive the tax system in operation in the UK as favourable, they are deterred by the rhetoric appearing in the mainstream media and in political statements, according the Big Four firm’s seventh annual report on tax competitiveness.
When respondents were asked to name their top three most attractive countries from a tax perspective, the UK was the most commonly cited in that group, albeit Luxembourg, Ireland and Switzerland have slightly closed the gap.
Specifically, the results suggest that business is not looking for further changes. Indeed, simplicity and stability were ranked as more important than a low effective tax rate.
However, 67% of FTSE 350 respondents said the media and political debate is likely to reduce investment in the UK with the sentiment even more marked among the FTSE 100 where 88% took that view. Executives in foreign-owned subsidiaries were more neutral, with 80% saying it had no effect. The remainder was equally split on whether it made them more likely to reduce their UK investment or, conversely, to increase it.
KPMG head of tax Jane McCormick said: “Our research shows that the efforts that the current and previous government have made to address anomalies and improve the attractiveness of the UK to business from a tax perspective are bearing fruit. Policymakers recognise that business is a powerful growth engine, creating jobs, wealth and generating economic activity.
“The dial seems to have moved on the UK’s tax regime from it being an actual deterrent to business and economic activity just five short years ago when some PLCs were emigrating, to it now being positively attractive, especially when viewed in the context of the UK generally being seen to be a very desirable place to live, work and do business. Even better, the results suggest there is no need for a ‘race to the bottom’ on rates with few respondents calling for further rate cuts.”
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