Corporate tax: something’s got to give
The UK Treasury may not be able to match Ireland’s 12.5 per cent corporate tax rate, but sooner or later it is going to have to make concessions on company taxation to ensure there are companies to tax.
The drip of British businesses re-registering abroad, especially to Dublin, is turning into a steady stream and the more that go, the more acceptable and the easier it is for others to follow. United Business Media and Shire are showing that the brass plaque can be moved offshore while leaving the business and management exactly where it always has been.
The Chancellor may think he is being blackmailed into concessions, but that’s how it works. When gaming companies moved to tax havens such as Gibraltar the Treasury’s only answer was to attract them back by cutting UK taxes on the basis that a reduced tax income is better than none. The shipping industry won its concessions after starting to re-register abroad.
Now companies have proved they can be just as mobile, moving their tax base while benefiting from London share listings and the other advantages of Britain.
If the Treasury tries to increase other corporate taxes to replace this lost income it risks turning the stream of defections into a torrent. Increasingly, tax will be concentrated on immobile bases such as property and consumers.
But if the UK cannot yet match the low corporation tax rates available abroad, the Treasury can act quickly to reduce the uncertainty over the tax of UK companies’ overseas earnings. The review currently being undertaken should be forced to report as early as possible – and it should avoid any changes that risk sending more companies abroad.
The hastily convened task force to advise the chancellor should tell him to stop tampering with the system, remove all uncertainties and hold out the hope of lower UK tax bills.
