Political parties should not underestimate the impact that personal tax rates, including the costs of employment (such as the apprentice levy, employers national insurance, and the proposed excessive pay levy), can have on a business leader’s decision about where they choose to establish, says Genevieve Moore, partner and head of corporate tax at Blick Rothenberg.
Genevieve said: “Low corporation tax rates are only part of the battle, and they must be clear that they want to encourage international businesses and internationally mobile individuals to the UK with a package of measures that set the UK far ahead of our European rivals.
“It’s concerning to see that Labour intends to increase corporation tax rates when the falling corporation tax rates have been a great advertisement that Britain is open for business over recent years. Working with many international businesses setting up operations in the UK, I see first-hand how a competitive corporation tax rate can help secure inward investment, which in turn leads to job creation, and therefore increased contributions to taxes through payroll taxes, including employers' national insurance which companies pay on virtually the full cost of employing staff.
“The Conservative manifesto sticks to the pledge to reduce corporation tax rates to 17% by 2020, which will help maintain the UK competitiveness during a period of political uncertainty, and ensure we stay competitive against countries such as Eire. The UK needs to be clear that they want to encourage business to establish in the UK and want to reward job creation whilst ensuring that aggressive tax arrangements are combatted through well drafted legislation."
She added: “The increases proposed to the personal allowance and higher rate tax thresholds by the Conservatives will benefit many of Britain’s working families, rewarding work and recognising that wages and the cost of living have moved on more quickly than increases in the tax rates and thresholds over recent years.
“The Labour proposals to increase the top rate of tax by 5%, and reduce the limit at which these tax rates apply are a risk to businesses establishing in the UK, as it could seriously discourage internationally mobile individuals from coming to the UK, when the top rate of tax including national insurance would be more than 50%.”
For more information please contact Genevieve Moore.