UK loses top spot in league table of company tax regimes
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The UK has lost its top slot in a league table of multinational companies’ favourite tax regimes, in spite of George Osborne’s flagship policy of cutting taxes to attract business to Britain.
The UK’s popularity increased slightly but it was leapfrogged by Ireland, which is expected to be less affected than some rival countries by the international crackdown on tax avoidance, according to a survey by KPMG, professional services group.
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The loss of the UK’s lead is a setback for Mr Osborne who, for the last two years, has hailed the UK’s rise up the rankings as a vindication of his policy of creating “the most competitive business tax system of any major economy in the world”.
But the Treasury said the UK retained its appeal to business and was benefiting from the big cuts in the rate of corporate tax from 28 per cent in 2008 to 21 per cent today.
David Gauke, financial secretary to the Treasury, said: “The UK remains one of the most competitive and attractive countries when it comes to deciding where to base your business. It is clear that the tax reforms we have made since 2010 are supporting the economic recovery, and that our plan to cut corporation tax again, to 20 per cent will lead to more jobs and investment in the UK.”
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Chris Morgan, head of tax policy at KPMG in the UK said the survey found the UK remained attractive with more foreign-owned companies considering moving their tax residence to Britain. Just 1 per cent of FTSE 350 groups were looking to move their tax residence out of the UK, down from 5 per cent last year.
He said: “Ireland may have leapfrogged into the top spot but the results suggest that has been a result of it taking votes from other European competitors rather than the UK.”
Mr Morgan said a big part of Ireland’s appeal was the cross-party commitment to retain its 12.5 per cent corporate tax rate – one of the lowest in the world. In the UK, there was greater uncertainty about corporate tax policy. Labour has promised to maintain the “most competitive corporation tax rate in the G7” but this would allow it to increase the rate by up to 6 percentage points, if elected.
The popularity of Ireland’s tax system with multinationals is a sign that they expect its system to be less affected by the international crackdown than rivals such as the Netherlands, Luxembourg and Switzerland, according to KPMG. Even though Ireland has bowed to pressure from the European Commission and other governments over the “double Irish” structure used to route profits to tax havens, multinationals headquartered outside the US are not affected.
Over 100 of the largest British-based businesses, including 25 foreign-owned subsidiaries, took part in the survey in which Britain’s largest businesses were asked to name which three countries they thought most attractive from a tax perspective.
