Lloyd's Of London Boss Attacks UK Government's Tax 'Dithering'

by Robert Lee, Tax-News.com, London

08 September 2008

The UK government must do something quickly to improve the country's corporate tax environment or risk presiding over an exodus of insurance firms to offshore jurisdictions, Lord Levene, the chairman of Lloyd's of London, has warned.

Speaking at Lloyd's sixth annual London City dinner on Thursday evening, Levene said that, while Lloyd's, the world's oldest insurance market, remains in healthy shape, the government's recent dithering over tax policy threatens to erode its competitiveness in the face of strong competition from the likes of Bermuda, Switzerland and Ireland, which offer much friendlier tax regimes.

The rate of corporate tax in the UK has recently been lowered to 28% from 30%, but with Bermuda offering a virtually tax-free environment to insurance companies, including a 0% corporate tax, some insurance firms have already made the decision to defect, including Hiscox and Hardy's. Others, such as Brit Insurance, are actively considering their domicile for tax purposes.

"The tax treatment of Lloyd's in the UK must be amended for us to stay on top," he argued.

Levene, who is a member of the Treasury’s high-level working group that is consulting on the UK corporate tax regime, went on to note that while the concerns of UK plc now appear to be sinking in at government level, its vague commitments to address the situation with new legislation "soon" are too little, too late.

“I fear though that ‘soon’ is a moveable feast, and we need a favourable decision now," he argued.

The Treasury has recently shelved plans to change the way foreign profits are taxed after objections from multinationals over new anti-avoidance provisions. It is now thought that these reforms, whatever shape they take, will not be introduced before 2010 - the likely year of the next general election.

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