UK To Maintain Tax Competitiveness, Says Gauke

David Gauke, Financial Secretary to the United Kingdom Treasury, has said that the newly elected Conservative Government will maintain a competitive corporate tax regime, although further reductions in the rate of UK corporate tax appear to be off the table. He also confirmed that the Government will continue to tackle aggressive tax avoidance.

In a speech at the “Britain, Europe, and tax competition” conference on June 1, organized by the European Tax Policy Forum and Institute for Fiscal Studies, Gauke outlined the Government’s “vision” on tax, which includes “doing everything we can to help Britain compete in the world.”

“We will continue to provide a competitive environment for businesses carrying on activity in this country,” Gauke said. However, he added that “if you owe tax [in the UK], we will expect you to pay it.”

“And, more specifically, if you generate profits from activity here in the UK, then you are expected to pay your fair share,” he added, referring to the recently introduced 25 percent diverted profits tax, intended to prevent the “artificial” shifting of profits from the UK to low-tax jurisdictions.

Under the former Conservative-led coalition government, the rate of UK corporate tax was cut from 28 percent in 2010 to the present rate of 20 percent, one of the lowest rates among the industrialized nations. However, Gauke acknowledged that corporate tax brings in around GBP40bn (USD61bn) per year and that “structural issues” in the UK tax system may have to be addressed before the corporate tax rate could be reduced below 20 percent.

“Before 2010 our corporation tax regime had been one of the factors pushing businesses away from the UK. Now, when I or other ministers speak to businesses about moving here, it’s a major selling point,” Gauke said.

According to the Financial Secretary, the corporate tax cuts delivered in the last parliament will save businesses GBP10bn a year from 2016, the equivalent of giving businesses enough money to hire 270,000 new employees.

Gauke’s comments suggest that the corporate tax status quo will be maintained for the five-year life of the Conservatives’ current term. However, on corporate tax issues at the European level he was more outspoken, saying that the UK Government would fight any plans for taxes to be set by Brussels.

“We have heard worrying noises from across the Channel – with talk of a minimum tax rate applied on profits. So let me be crystal clear. Direct taxation is a matter for EU member states. Any EU-wide measure would require unanimity across all EU countries. Any form of EU-wide minimum tax rate would undermine our sovereignty and we therefore would block it. Put simply, it ain’t happening.”