UK corporation tax still uncompetitive

KPMG's new corporate tax rate survey has just been published. It shows that, despite the cut in the UK's headline corporation tax rate to 28 per cent, the UK still has the 8th highest rate in the 27 EU countries. The global average corporation tax rate is now 25.9 per cent, and the EU average just 23.2 per cent.


Interestingly, the survey shows that for the first time since 1994, no country in the 106-strong sample raised rates last year. It also finds that corporate tax competition in the EU has been particularly strong over the past decade, moving average corporate tax rates from the highest to the lowest of any group of countries in the OECD. 


While it is true that tax is not the only important factor affecting competitiveness, and corporation tax is not the only tax businesses face, the importance of maintaining competitive corporation tax rates is once again underlined today with the news that London hedge fund Krom River is moving to Switzerland, in large part due to tax. The FT reports:

"Krom was not affected by the tax changes on non-domiciled foreigners living in the UK, but its partners were worried that aggressive tax inspections – a common industry complaint – could disrupt its business.

"The move will also reduce the partners’ personal taxes from a top rate of 40 per cent in the UK to about 10 per cent and replace a London commute with easy access to the outdoors.

"“The UK is great for foreign managers because they are non-doms, but it is not so great for British managers,” said one hedge fund executive.

"David Butler, a partner at consultant Kinetic Partners, said that hedge funds were attracted by the low tax in Zug, along with the quality of life, clean air and skiing.

"“It is not the regulatory regime, it is the tax,” he said. “And they think the tax is going to get worse. The financial position of the UK is such that more revenue has to be raised.”"

This is hugely significant. Not only are UK taxes already uncompetitive, but executives think they are going to rise - the very worst position for the UK to be in.

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