Tuesday 24 October 2017

UK's tax cuts 'roll out red carpet' to business

Britain's Chancellor of the Exchequer, George Osborne, holds up his budget case for the cameras as he stands outside number 11 Downing Street
Britain's Chancellor of the Exchequer, George Osborne, holds up his budget case for the cameras as he stands outside number 11 Downing Street
Donal O'Donovan

Donal O'Donovan

Britain dramatically slashed business and personal taxes yesterday, throwing down an unprecedented challenge to efforts here to attract foreign direct investment and business start-ups.

The UK Chancellor of the Exchequer George Osborne will cut his country's headline rate of corporation tax to 17pc by 2020, from the current 20pc, he said in a Budget speech at Westminster yesterday.

Capital gains tax (CGT), paid when business owners sell assets, was cut to 20pc from 28pc. That compares to a standard 33pc CGT rate here.

The moves pose a direct challenge to Ireland's attractions as a business base.

"Under David Cameron, the UK Government has rolled out the red carpet for entrepreneurs. At that same time in Ireland, there has been slow progress on a pro-entrepreneurial policies which has meant that Irish entrepreneurs have been enticed to Northern Ireland or the UK by the relatively lower cost base and more attractive tax regime," Dublin Chamber of Commerce said, reacting to the cuts.

"The importance of supporting entrepreneurs is still not fully appreciated in Ireland. Small changes made to CGT in the last Budget were a step in the right direction, but many startup owners were left disillusioned by a lack of other pro-enterprise changes," it said.

When George Osborne took over as Britain's finance minister in 2010 the UK corporation tax was 28pc, well over double the 12.5pc rate here.

Yesterday's business friendly budget also set out higher thresholds for business rates for small companies that will effectively scrap local rates for more than half a million British small and medium enterprises (SMEs).

The moves emphasize his Conservative Party's image as the champion of enterprise, though Osborne also tightened loopholes that allow corporations operating in countries to minimise their UK tax bills, including some multinationals based in Ireland.

"This is a budget which gets rid of loopholes for multinationals and gets rid of tax for small businesses," George Osborne said in his budget speech.

"A £7bn tax cut for our nation of shopkeepers. A tax system that says to the world: We're open for business. This is a government that's on your side."

The UK cut taxes for business and vowed to balance its budget despite official forecasts showing a slow down in the economy there, where growth is now tipped to be 2pc this year.

Addressing concerns over rising obesity rates, Mr Osborne introduced a new "sugar tax" on soft drinks that hit shares of Associated British Foods, Tate & Lyle, Britvic and AG Barr.

In a nod to the challenges facing oil and gas explorers the tax on North Sea oil is being effectively abolished, and this change will be backdated, effective from the start of the year.

In an appeal to voters ahead of the June Brexit ballot, Mr Osborne increased the income threshold where people start paying a higher 40pc tax rate to £45,000 (€57,000). (Additional reporting Bloomberg)

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