Following heavy criticism of the Government's intention to change the corporate tax regime, Chancellor Alistair Darling launched a new committee yesterday aimed at keeping UK corporate taxation competitive.
The committee will be chaired by Jane Kennedy, Financial Secretary to the Treasury, and will be composed of up to ten senior executives of multinational companies. Members will be invited in by the Treasury, but no names have been disclosed as yet.
The government faces the problem that, as business operations are taking place increasingly on an international level, companies use these opportunities to cut their tax
bills in the UK.
Subsequently, a multitude of anti-avoidance measures have been introduced which foster the reputation that the UK corporate tax system is complex and unreliable.
The Government's plans to change the taxation of UK companies with overseas profits has prompted some major multinationals to move their headquarters to Ireland or Switzerland, which are both countries with low-tax jurisdictions.
One of those still considering a move, Sir Martin Sorrell, CEO of the media group WPP, claimed that under the current circumstances transferring their headquarters to Ireland could save the company up to £200 million a year on their tax bill.
Critics fear that the new anti-avoidance regulations could cost London its status as a prime business location, and that the government might lose billions in revenues.
They argue that simplifying the tax system instead of adding more rules to keep tax revenues in Britain would make it more attractive and encourage more investment which would, in turn, boost the UK tax revenues.
Announcing the talks with business leaders, the Chancellor said yesterday: "We need to anticipate a growing problem for all governments - how to protect revenues in an increasingly global market place for goods and services while promoting the competitiveness of our businesses so that they can take advantage of open markets."
"The UK corporation tax rate is one of the lowest in the G7", he continued, and affirmed, "I am determined that we do what is necessary to remain one of the world's best places to do business - and critically to ensure that we maintain our strong and resilient economy and our position as the world's leading financial centre."
© Fair Investment