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George Osborne was also in
the Global Tax 50
2014 |
"Let the message go out: this country's tolerance for those
who will not pay their fair share of tax has come to an end,"
proclaimed UK chancellor of the exchequer George Osborne in
March as he announced new measures to crack down on tax
avoidance and evasion, including the headline-grabbing diverted
profits tax (DPT) – referred to by some as the 'Google
tax'.
The tax, which came into effect on April 1, is expected to
raise £3.1 billion ($4.4 billion) from multinationals by
2020. It imposes a tax rate five percentage points higher than
the otherwise applicable UK tax rate, and is applied to profits
which companies are deemed to have "artificially diverted" from
the UK.
The measure was likely taken with one eye on the UK general
election, from which Osborne's Conservative party emerged
victorious, managing to secure a slim majority which allowed
them to dispense with their coalition partners from the
previous government.
While the narrowness the Conservative majority may make it
difficult to pass some legislation – particularly any
which might substantially cut tax revenues garnered from
companies, given the shift to the left of the main opposition
Labour party – the government has managed in many
instances to sidestep parliamentary scrutiny by using
'statutory instruments', which can approve new legislation
without the need for a House of Commons debate.
In his first Budget of the new government, Osborne announced
that corporation tax will fall to 19% in 2017 and by a further
percentage point in 2018, as part of the government's aim for
the UK to have the most competitive tax regime in the G20 and
send a strong signal to investors that Britain is 'open for
business'. Osborne will hope that the inflow of businesses
– and many are relocating to Britain, both from Europe
and further afield – will help plug the hole which
still remains in the UK's finances, as deficit reduction
targets have been missed due to lower-than-expected growth.
The past 12 months saw Osborne come under challenge over the
UK's attractive patent box regime, however, which faced
regime-tweaks in order to comply with the modified nexus
approach heralded by the OECD's BEPS Project. Despite those
modifications, and the expected uptake of the majority of BEPS
recommendations, Osborne is still steering the UK down the
pro-tax competition path and the country retains a range of
attractive tax credits for businesses.
An important task for Osborne during the year ahead will be
preparing for the 2017 referendum on the UK's EU membership.
The referendum, which looked to be set for a cut-and-dried 'in'
vote when it was announced, is now a much closer affair.
Osborne is likely to position himself in favour of staying
in, in accordance with most businesses. Should he negotiate the
next few years successfully, he will have his eyes firmly fixed
on the leadership of the party – Prime Minister David
Cameron has announced he will not seek a full third term, and
Osborne is among the front-runners to succeed him.