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Rishi Sunak's Plan to Adopt Minimum Corporate Tax Rate Warns of Damage to Britain's Competitiveness

Strategic Insights

— 2 min read

The UK's plan to implement a 15pc minimum corporate tax rate, agreed to in a global deal in 2021, has been met with warning from the Legatum Institute that it will damage Britain's competitiveness and leave the country with additional costs and red tape. The Institute, a think tank, has urged Prime Minister Rishi Sunak not to cede control of the key business tax, instead using Brexit freedoms to reject the global minimum tax facilitated by the OECD. According to the report, authored by Matthew Sinclair, former chief economic adviser to Liz Truss, the UK's decision to implement the policy faster than other nations will create unnecessary costs, leave the UK at a competitive disadvantage, and prevent future governments from slashing taxes.

Key Takeaways:

  • The Legatum Institute warns that the UK's plan to adopt a 15pc minimum corporate tax rate will damage Britain's competitiveness and lead to additional costs and red tape for businesses.
  • The Institute urges Prime Minister Rishi Sunak to reject the global minimum tax facilitated by the OECD and instead use Brexit freedoms to reassert UK sovereignty over tax policy.
  • The report highlights that the UK's decision to sign up to the agreement without a debate or vote in Parliament is "a bad idea in principle and an unwelcome departure from a longstanding, bipartisan commitment to maintain the UK's sovereignty over its tax affairs".
  • Businesses will face estimated upfront costs of £13.2m and annual costs of £8.2m on average to comply with the new minimum tax.
  • The Institute warns that officials have materially underestimated the cost of implementation for businesses, with many facing compliance costs.
  • Rejecting a corporate tax floor would ensure policymakers can determine the "right corporation tax for the UK", allowing for flexibility in setting taxes that reflect the UK's changing economic needs.

Specific Names and Stories:

  • Rishi Sunak, Prime Minister
  • Liz Truss, former Prime Minister
  • Matthew Sinclair, former chief economic adviser to Liz Truss
  • Joe Biden, US President
  • Donald Trump, former US President

Statistics:

  • The OECD's minimum tax plan has 130 countries, including the US, UK, and the rest of the G7, in support.
  • The global agreement aims to tackle tax abuses by some of the world's biggest companies and establish a minimum global corporate tax rate for the first time.
  • The UK's estimated compliance costs for businesses are £13.2m upfront and £8.2m annually on average.
  • The UK has already raised corporation tax by 6% (from 19% to 25%) under Rishi Sunak's leadership.
  • The proposed £10bn tax cut for businesses in the Autumn Statement could be extended to a tax break known as "full expensing", allowing companies to write off the cost of investment against their tax bill in one go.

Sources:

  • Legatum Institute report by Matthew Sinclair
  • The Telegraph
  • Office for Budget Responsibility
  • Institute for Fiscal Studies
  • Centre for Policy Studies
  • Confederation of British Industry
  • Make UK

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