In talking about a slashing of the UK’s corporate tax rate to less than 15%, George Osborne has signalled that the UK is open for business and accelerated the race to the bottom on corporate tax rates across the world.
In the wake of the UK’s decision to exit the EU, the Chancellor has clearly turned his attentions to maintaining the competitiveness of the UK in attracting investment and ensuring that it holds on to big businesses, who may now be looking at transferring operations overseas to ensure access to the single European market.
The decision marks an escalation of corporate tax rate reductions across the globe and will undoubtedly spark the next round of inter-country competition, as rates hurtle towards those seen in countries such as Ireland – at 12.5% – which have previously been seen as outliers.
The move will no doubt re-open the debate over what constitutes a ‘tax haven’. At 15% or less, the UK looks set to be confirming its position in this bracket, which will no doubt anger those, across the G20, who have long been working to garner support for a more harmonised global tax system.
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This move, on the back of the Brexit decision, is a step backwards for harmonisation, though multinationals will no doubt welcome the fact that their interests are high on the agenda in an increasingly uncertain economic environment.
