George Osborne plans on lowering corporation tax to under 15% as part of an effort to make the UK an attractive location for new investment and bring in new business which might have otherwise been put off by the fact that the country has voted to leave the EU.
The tax cut would bring the UK corporation tax rate 5% lower than its current 20% rate, and bring it down to the lowest corporation tax rate of any major economy – closing in on the Republic of Ireland’s 12.5% levy.
The average corporation tax rate among other countries in the Organisation for Economic Co-operation and Development is about 25%.
The Chancellor said in an interview with the Financial Times that the UK must show the world that it is “still open for business” after the country’s decision to leave the EU.
Osborne says that he has set out plans for Britain to become a “super competitive economy”.
The BBC said that a spokesperson for the Treasury confirmed the FT’s story, but they are unsure when the cut will be introduced.
Reuters reported that the OECD, in an internal email, warned that the Brexit fallout may “push the UK to be even more aggressive in its tax offer” but that further steps in that direction “would really turn the UK into a tax haven type of economy.”
Some believe the UK’s corporation tax rate should be as low as 10%
Jonathan Isaby, chief executive of the TaxPayers’ Alliance, was quoted by the Press Association as saying:
“The Chancellor is absolutely right to be considering a big cut to corporation tax, as it would show that the UK is ready to seize new opportunities in the global economy.
“But Mr Osborne must be bold and cut the rate to 10% as soon as possible to really demonstrate that we are open for business, with competitive conditions to match our talented workforce. It’s crucial that our politicians have a positive vision for British taxpayers outside the EU, and meaningful tax cuts to boost growth and prosperity are an excellent first step.”
Corporation tax is the tax the government collects from the profits of limited companies, cooperatives, some clubs and other organizations. In the USA and Canada it is called ‘corporate tax’, and in Australia ‘company tax’.