Dated: 29 November 2010

Responding to the Government’s publication today of Corporate Tax Reform: Delivering a More Competitive System, the Institute of Directors (IoD) makes the following comments:

• The Government is absolutely right to treat corporate tax reform as a priority. Every country will want to attract international capital in order to support the recovery, and the UK needs to be ahead of the game.
• The Government is also right to put a lower rate at the top of its list of principles. Reducing the rate is both the simplest way to improve competitiveness, and the most effective way. A lower rate will also take pressure off the controlled foreign companies regime, because fewer countries will be lower-tax relative to the UK. And it will take the sting out of any trade-offs that may be necessary in order to move to a more territorial regime.
• We warmly welcome the Government’s decision not to make significant changes to the UK’s competitive regime for interest expense. That regime is one the UK’s biggest plus points internationally.
• The approach to policy development, and the clear timetable for the next three years, are also to be welcomed.

Commenting on the publication, Richard Baron, Head of Taxation at the IoD, said:

“This is a good document overall, and some of the specifics are certainly right. No doubt there will be argument about other details, but the Government has set up consultation arrangements to thrash out the difficult questions.

“But what this document lacks is real ambition. Reducing tax rates is the best, and the simplest, way to improve competitiveness. Yes, the main corporation tax rate will come down to 24 per cent by 2014. But even that will not place the UK out ahead of the pack. We need a promise to keep the rate coming down in future years, so that the UK is seen to be outstandingly competitive.”