UK government vows to cut corporation tax rate to 18pc by 2020
Published 09/07/2015 | 02:30
The UK is slashing its rate of corporation tax again in a bid to attract more inward investment.
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.
Although Ireland's rate is lower, the move puts further pressure on Ireland to ensure it remains attractive for foreign companies.
Business body Ibec suggested Ireland was losing out to the UK.
"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."
Yesterday's cut also may make it easier for Northern Ireland to slash its corporation tax rate to match the Republic's, if agreement can be found between the North's political parties.
Consultancy giant Ernst and Young said the corporation tax cut, which was announced by UK Chancellor George Osborne in the British budget yesterday, would benefit about a million UK businesses.
"In terms of the debate where Northern Ireland should set and reduce its own corporate tax rate, one of the most contentious consequences is that Northern Ireland needs to fund the cost of this," said Michael Hall, managing partner of EY Belfast.
"Under today's proposals, the difference between the UK headline rate and Northern Ireland rate will have reduced, therefore the cost of funding such a measure could reduce up to 25pc."
Yesterday's Budget was Mr Osborne's first since the Conservatives secured an overall majority in May's election.
He detailed cuts to welfare spending, reduced the tax bill for workers and also introduced a new, so-called national living wage, which will start at £7.20 (€10), rising to £9 (€12.50) per hour by 2020.
But news of the wage hike was tempered by cuts to welfare, which included an annual benefit cap of £23,000 (€31,929) in London and £20,000 (€27,765) in the rest of the UK. Support for children through tax credits and universal credits will also be limited to just two children, with none for the third.
Mr Osborne also announced that it would now take four years, not three, to achieve his aim of turning Britain's hefty budget deficit into a surplus.
"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."
Mr Osborne said the UK government would continue to raise the amount of earnings that is exempt from income tax, as well as increasing the thresholds for the 40pc income tax rate and for inheritance tax on family homes to the £1m mark.
The interim leader of the Labour Party, Harriet Harman, however, derided the Budget plan.
"Even with the higher national living wage that he's announced, it will not be enough for a family to live on because of the tough cuts in tax credit," she said.