A new report from Taxand’s UK member firm, A&M Taxand, and Capital Economics suggests that specific and targeted changes to UK tax policy post-Brexit could generate significant economic growth and benefits for the UK, theoretically worth over £100bn.
In an effort to explore the ‘art of the possible’, A&M Taxand UK and Taxand commissioned macroeconomic research firm, Capital Economics, in Autumn 2019, to analyse and assess the tax system options available to the UK post-Brexit. The result is a report that sets out nine policies in total, providing context, potential changes and overall economic impact of each.
Based on the assessment process, and expertise provided by A&M Taxand’s experts, a list of policy recommendations has been made. The emerging policies, independent of client or sector bias, cover a range of areas but all focus towards the same goals:
The report analyses the following nine policies and provides an impact assessment for UK plc if they were to be implemented:
1. Increase in R&D and IP incentives
2. Creation of free ports
3. Regional corporation tax with lower average rates would increase GDP by 1.2%
4. Energy tax changes could reduce UK carbon footprint
5. Lower income tax
6. Lower corporation tax rate
7. Changes to / possible overhaul of VAT
8. Simplification of the current tax system
9. Establishment of a ‘unilateral free trade’ model
In particular, the report indicates that significant economic growth could be achieved through a reduction in the corporation tax rate, an increase in research and development (R&D) incentives and the creation of free ports. In addition, targeted energy tax changes which encourage carbon reductions could make the UK economy greener while cutting energy consumption by 1.2%.
A post-Brexit UK will have many tax policy options open to it, including some that were not available whilst the UK was a member of the EU. Tim Wach, Global Managing Director, Taxand, commented:
“It is irrefutable that tax policies can significantly impact the growth of an economy – for better or for worse – with those impacts potentially worth billions. Tax policy changes, however, cannot be viewed in isolation, not least because of the inevitable ancillary impacts that almost always result. The tax changes examined in this report, which are a small sample of those available in a post-Brexit UK, clearly indicate that smart tax policies, adopted by the UK government, could bring significant economic benefits. Of course, the competitive advantage to the UK generated by any of these potential policy changes may be blunted by external pressures, including reactions from other countries that modify their own tax policies in response. On top of this, global tax bodies such as the OECD are moving ahead with their own actions, intended to ensure that countries enact changes in a consistent and coherent manner.”