Irish 'wake up call' as UK slashes corporation tax to 18pc
The UK is slashing its rate of corporation tax again in a bid to attract more inward investment, UK Chancellor George Osborne announced yesterday.
The cut to 18pc by 2020 means Britain will have reduced the rate of tax on corporate profits by 10 percentage points in less than a decade. The current rate stands at 20pc, compared to Ireland's 12.5pc.
Mr Osborne yesterday delivered his second Budget statement in four months, but it was his first since the Conservatives secured an overall majority in May's election and involved cuts to welfare spending, reducing the tax bill for workers and introducing a new, so-called national living wage of £9 by 2020 for over-25s.
Business body Ibec branded the latest cut to the corporation tax rate as a "wake up call" for Ireland.
"Britain is fast becoming a more attractive European investment location, to Ireland's potential detriment," said Ibec economist and head of policy Fergal O'Brien.
"It is crucial that we match and outperform the UK in its efforts to attract investment without delay," Mr O'Brien said.
"A cut to the UK corporate tax rate, along with recent innovation tax incentives, mean the UK now has one of the most attractive tax offerings in Europe.
"In contrast, Ireland's attractiveness was significantly eroded during the crisis, particularly due to higher taxes on work."
Mr Osborne said the decision to cut corporation tax had "created millions more jobs, brought businesses back to Britain and increased much-needed investment".
He added: "This country cannot afford to stand still while others rush ahead. I am not prepared to see that happen. Today I announce that I am cutting it again. Britain's corporation tax rate will fall to 19pc in 2017 and 18pc by 2020."
In a speech that lasted around an hour, Mr Osborne detailed the first Conservative-only Budget in 18 years and used the Greek debt crisis to call for less spending and less borrowing.
The Chancellor said the UK economy would grow by 2.4pc this year - fractionally lower than an earlier forecast of 2.5pc - and 2.3pc next year.
Ireland's economy is forecast to grow by 4pc this year and 3.8pc next year.
"Britain still spends too much, borrows too much," Mr Osborne said. "You only have to look at the crisis unfolding in Greece as I speak, to realise that if a country's not in control of its borrowing, the borrowing takes control of the country."
Britain's budget deficit of nearly 5pc of economic output in the year to March is one of the biggest among rich economies. The Chancellor pushed back by a year the target of achieving a budget surplus into the 2019/2020 financial year.
On income tax, he raised the amount of earnings that are exempt to £11,000 from next year, hiked the higher rate threshold to £43,000 and the inheritance tax threshold on family homes to the £1m mark.
He said Britain would abolish the permanent non-domiciled tax status which many rich foreigners had used to reduce their UK tax bill. Welfare cuts - including a reduced benefits cap and no tax credits for couples with a third child - will save the exchequer £12bn by 2019 to 2020.
Sweetening the cuts was the announcement of a new national living wage for workers over 25. It will start at £7.20 from April 2016, rising to £9 by 2020.