David Gauke's speech to the Lord Mayor's Taxation Forum
The Exchequer Secretary to the Treasury speaks on international tax competitiveness.
Introduction
I바카라 사이트™ve been asked to speak this afternoon about international tax competitiveness, and how the UK바카라 사이트™s system fares against our international competitors. And in some respects, I바카라 사이트™m actually the worst person in the room to ask about that.
Because in a global business environment, it isn바카라 사이트™t politicians 바카라 사이트“ even those politicians like me, who are responsible for national tax policies 바카라 사이트“ that make the ultimate call about which tax systems are the most competitive or the most attractive. It바카라 사이트™s businesses like yours, and you vote with your feet.
But what I can talk about, is the efforts that this government has made over the last four years to ensure that when multinationals are looking for a place to locate their headquarters. Or when entrepreneurs are looking for a place to start their new businesses, then this country is a place they consider바카라 사이트¦
And since we came to office, we바카라 사이트™ve been working towards achieving those goals in two main areas:
- by making our own tax system as competitive as possible
- by taking action to reform international tax rules 바카라 사이트“ so international tax competition takes place in a fair environment
In short, we want a tax system that is simple, competitive and fair; and supports economic growth and investment.
Competitiveness
Now, I know we바카라 사이트™ve got a lot of tax experts in the room, so I won바카라 사이트™t regurgitate of all the changes we바카라 사이트™ve made in great detail.
But since 2010 we바카라 사이트™ve cut corporation tax from 28% to 21%. And this time next year it will fall again, to just 20%.
To spur innovation, we바카라 사이트™ve introduced the Patent Box and the 바카라 사이트˜above the line바카라 사이트™ tax credit for Research and Development.
- we바카라 사이트™ve modernised our Controlled Foreign Company (CFC) regime
- we바카라 사이트™ve cultivated a generous environment for oil and gas exploration
- we바카라 사이트™re supporting the creative sector through a number of targeted tax reliefs
And at the Budget last month, we announced further tax incentives to support business, by:
- doubling the Annual Investment Allowance
- increasing the R&D credit for innovative companies
- overhauling the UK Export Finance direct lending programme
It is not just about the competitive tax rates, reliefs and allowances.
How we make tax law is important. In 2010, we published a Corporate Tax Roadmap, setting out what we were going to do and also, perhaps more importantly, explaining what we were not going to do.
We have also established a new tax policy-making process, ensuring proper consultation and the early publication of draft legislation 바카라 사이트“ enabling us to refine and improve our legislation.
And the importance of tax administration can be under-estimated.
We recognise that our tax administrators need to understand major taxpayers.
We바카라 사이트™ve made sure that the largest two thousand corporations in the UK have their own dedicated relationship managers at Her Majesty바카라 사이트™s Revenue and Customs, who can support those organisations and help to ensure that they are paying the correct amount of tax.
And that system exists, because it바카라 사이트™s in everyone바카라 사이트™s interests to have a strong working relationship that will ensure revenues are paid fully, and that any disputes or queries can be played out quickly without expensive litigation.
This is not about being a soft touch. Tough action is taken wherever necessary. But a constructive relationship built on trust between the taxpayer and the tax collector continues to bring in the revenue for the UK exchequer and add to the attractiveness of the UK system.
But 바카라 사이트“ as I said before 바카라 사이트“ we바카라 사이트™ll only know if those policies are working if we see that they바카라 사이트™re encouraging companies to move here, or stay here, or expand here.
Impact
And every week new companies are announcing moves to the UK. In the past month alone we바카라 사이트™ve seen a range of announcements from major firms moving headquarters to the UK or unveiling new investment projects here. Firms like Siemens, Hitachi Rail, Brit Insurance and Proteus Digital Health have all made very positive announcements in the past few weeks바카라 사이트¦
And business surveys too reflect the positive impact of the corporate tax reforms.
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for the past two years the UK has ranked highest in the KPMG survey on international tax competitiveness
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in an HMRC survey earlier this year, 9 in 10 businesses said the corporation tax cuts had been good for the UK바카라 사이트™s competitive position
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and when I manage to escape Westminster during Parliamentary recess, and get around the globe to persuade people of the merits of our tax system, I바카라 사이트™m constantly met with a receptive audience
Just last week in fact, I had some very constructive talks with companies in New York and Boston and Chicago, which I hope will lead to further investment on our shores바카라 사이트¦
More broadly, the tax reforms are a central plank of our economic strategy. And that strategy is working:
- the IMF say the UK will grow faster than any other G7 economy this year
- employment is at record levels
- business confidence is high
- and business investment is forecast to grow rapidly
Fairness and BEPS
So we have taken great strides to make the UK more competitive and better equipped for the global race. And we are seeing the results of that action.
But 바카라 사이트“ as I said previously 바카라 사이트“ we also know that any competition needs to be fair. The UK government wants an international system with simple and fair rules that ensures all companies pay their share. And that will require action at an international level.
We shouldn바카라 사이트™t really be surprised that the current international tax rules need reforming. They were first developed nearly 100 years ago. And we need to change them바카라 사이트¦ yes, so they continue to support free trade and ensure a level playing field for businesses. But also to address weaknesses where 바카라 사이트“ for example 바카라 사이트“ multinationals can use cross-border business structures or finance transactions that exploit differences between two countries바카라 사이트™ tax rules.
So driving forward reform on the international stage is another priority area for the UK.
And it바카라 사이트™s for that reason that we바카라 사이트™ve taken a lead role so far on the international stage through the Base Erosion and Profit Shifting 바카라 사이트“ or BEPS 바카라 사이트“ project that seeks to address tax avoidance.
It바카라 사이트™s for that reason too, that we바카라 사이트™ll continue to work through the G20 and OECD 바카라 사이트“ on the digital economy, on coherence, on substance and on transparency 바카라 사이트“ to make sure that this area is properly reformed.
I바카라 사이트™ll be very happy for you to ask me more detailed questions on that work during our Q&A, but I want to be very clear on two things.
First, the BEPS project is not about bashing business.
Many in the business community acknowledge that in some cases the international tax rules have failed to keep pace with globalisation바카라 사이트¦
And those businesses recognise that we need to work together so that those tax rules can support sustainable cross border trade and investment.
And second, if reform in this area is to be effective, it needs to be multilateral.
Unilateral or uncoordinated actions by governments in isolation could result in either double taxation or double non-taxation.
So we recognise that this is an international problem, and that it requires an international solution. And we will be taking forward work at an international level.
And although any change will involve uncertainties and compromises, the direction of travel in the BEPS process suggests that there is a big prize available.
Most observers believe that there will be a stronger link between economic substance and tax.
As the sixth largest economy in the world, we have the skills base, infrastructure and cultural diversity you would expect. We are somewhere people want to be.
But, and this is unusual for such a country, we offer a competitive tax system. Not as a haven, not as a location for brass plates. But as somewhere to locate jobs and investment.
So the UK government believes in a low corporation tax rate.
We believe in a simple system that taxes profits in the UK.
And we believe in good working relationships between companies and tax officials, where aggressive behaviour is clamped down on.
Conclusion
In the 4 years since I first walked through the doors of the Treasury, I바카라 사이트™m confident that this government has taken the right decisions to create a competitive tax system that encourages growth and investment.
Do I believe that our work is done?
Absolutely not.
The truth is that businesses have choices. Last week in Chicago, I met a tax director for a multinational which operates in 80 countries. If that business wishes to expand its operations, it has got up to 80 options.
If a country is to ensure that, as often as possible, it is chosen as the place for further investment, it has to make a compelling case. We must constantly ask ourselves, are we making that compelling case?
And I believe that our case grows stronger by the month.
I believe we are on course to creating a tax system that is fairer, more competitive and more robust.
And I believe that now isn바카라 사이트™t the time to reverse the progress made. But to stick to the course that we바카라 사이트™ve set out.
As I said at the outset though, it바카라 사이트™s ultimately up to businesses to decide just how competitive the system I바카라 사이트™ve described is, so I바카라 사이트™ll look forward to hearing the views of everyone on the panel, and 바카라 사이트“ no doubt 바카라 사이트“ a few of you in the audience too, as to whether you agree.
Thank you.