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Osborne Mulls Corporation Tax Cut

by Robert Lee, Tax-News.com, London

05 July 2016


UK Chancellor George Osborne has said that he will cut the corporation tax rate to less than 15 percent in an effort to build a "super competitive economy" in the wake of last month's Brexit vote.

Osborne told the Financial Times that "what's done is done," and that the Government should accept the referendum verdict "instead of moping around or trying to unpick it." He warned that the country faces "very challenging times," and added, "I don't resile from the warnings I made about the impact – including a recession."

The Chancellor did nevertheless stress that "We must focus on the horizon and the journey ahead and make the most of the hand we've been dealt." He laid out a five-point plan for proving that the UK remains "open for business." According to the Financial Times, this includes a plan to reduce corporation tax to below 15 percent.

The rate is currently 20 percent, and had been scheduled to fall to 18 percent by 2020. However, in his March Budget Osborne announced that the rate would be reduced still further, to 17 percent by 2020.

Osborne also told the paper that a priority must be to establish a new relationship with Europe, "and that means putting the greatest emphasis on having the best possible trade in goods and services including financial services." He will also focus on enhancing relations with key markets such as China. "We've got to get on a plane and sell Britain to the world," he said.

A 15 percent corporation tax rate will bring the UK closer in line with the 12.5 percent rate charged in neighboring Ireland. Irish business group Ibec said that Osborne's plans reinforce the need to significantly improve Ireland's international competitiveness.

Ibec CEO Danny McCoy said: "Ibec has long highlighted the competitive threat from the UK's increasingly pro-business tax regime. New plans to cut the UK's corporation tax rate is a further wake-up call that cannot be ignored. The UK vote to leave the EU only increases the need for Ireland to significantly improve its business and personal tax offering."

"Ireland has had very limited control over major recent political and economic developments. However, we must act decisively in areas where we do have control. The next Budget should include bold moves to support investment and job creation. We need to slash capital gains tax, cut the marginal [income] tax rate to attract mobile talent, and bring the tax treatment of share options into line with the UK and other competitor economies. Now is not the time to sit on the sidelines and see what happens."

TAGS: capital gains tax (CGT) | tax | investment | business | Ireland | financial services | corporation tax | China | United Kingdom | tax rates | trade | individual income tax | European Union (EU) | services | Europe

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