EU introduces minimum company tax rate which is 40% less than the UK’s

What on earth are Rishi Sunak and Jeremy Hunt thinking?

Facts4EU asks how the UK’s economy can compete, with such high taxes in Brexit Britain

On 01 Jan 2023 the EU Commission announced the introduction of a minimum corporation tax rate of just 15%. The UK’s Chancellor, Jeremy Hunt, has increased the UK’s rate from 19% to 25%.

In the Spring 2021 Budget the then Chancellor, Rishi Sunak, announced a major reform to the corporate tax regime, putting up company taxes by 30%. On 23 September 2022, as part of the Government’s Growth Plan, Liz Truss’s then Chancellor Kwasi Kwarteng announced the increase in the main corporation tax rate from 19% to 25% would be cancelled.

The following month the new Chancellor Mr Hunt ruled that the basic rate of corporation tax would increase to 25% for all companies of any size, and to 19% for smaller operations. This applied from April 2023.

Both of these decisions will have had an impact on all business operations in the United Kingdom, affecting investment and jobs.

How can agile Brexit Britain be so much less attractive than the cumbersome EU?

It is important to note that the EU has set minimum corporation tax rates at 15%. This is in line with the new OECD rules. It does not enforce this rate for those EU member countries which have higher rates. Nevertheless this is an important decision.

“Ground-breaking new EU rules come into effect today introducing a minimum rate of effective taxation of 15% for multinational companies active in EU Member States.”
“The framework will bring greater fairness and stability to the tax landscape in the EU and globally, while making it more modern and better adapted to today's globalised, digital world.”
“While almost 140 jurisdictions worldwide have now signed up to those rules, the EU has been a front-runner in translating them into hard law. By lowering the incentive for businesses to shift profits to low-tax jurisdictions, Pillar 2 curbs the so-called "race to the bottom" - the battle between countries to lower their corporate income tax rates in order to attract investment.”
- EU Commission statement, 01 Jan 2024

Brexit Facts4EU.Org Summary

Minimum corporation tax rates in the EU versus the United Kingdom

Headline rates

EU : 15%
UK : 25%

[Sources : EU Commission and HM Treasury.]

“This new year marks a new dawn for the taxation of large multinationals. The entry into force in Europe and in jurisdictions around the world of this historic reform marks a major step towards a fairer corporate taxation system. By lowering the incentive for businesses to shift profits to low-tax jurisdictions, the new rules will help curb the so-called ‘race to the bottom’ on corporate tax rates in the EU and globally.
“I encourage all signatories to the global tax agreement to walk the talk and also enact swiftly this key reform, which has the potential to generate an extra $220 billion annually to help countries around the world to fund crucial investments and high quality public services.”
- Paolo Gentiloni, EU Commissioner for Economy – 01 Jan 2024

Observations

In a highly competitive global world, the main level of corporation tax in any country sends a very clear message to companies considering where to invest next, in siting their manufacturing or services operations.

Yes, Jeremy Hunt has made changes to things like capital allowances but these are not the headline figures which grab attention. It is the main level of corporation tax which signals how much a country is open for business. The EU Commission's latest move is designed to prevent countries such as Ireland from gaining a competitive advantage by offering corporation tax rates as low as 12%. Nevertheless, this new law prescribes 15% as the minimum rate and this is what the UK should be offering if it wishes to attract global businesses.

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[ Sources: EU Commission | HMG ] Politicians and journalists can contact us for details, as ever.

Brexit Facts4EU.Org, Fri 05 Jan 2024

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Reader Comments 19

11. jon iivesey , Friday, January 05, 2024, 18:16:

All I gt out of this "discussion" is that it is difficult for Facts4EU to post every day and make sense. Instead of making the effort to post every day and ending up with rather tortured attempts at making a point, maybe it would be an idea to post every two days and post stuff that is a bit sounder. Six years after the Referendum, it would make sense for Brexit developments to slow down a bit.

12. jon iivesey , Friday, January 05, 2024, 18:26:

6. KB , "Ireland will have to increase their corporation tax rate then. Considering that the low rate of CT in Ireland is responsible for their economic miracle, I wonder what they think of being told to do this?"
There is no "economic miracle". Irish GDP numbers are pretty work a work of fiction, not calculated on the same basis as any other country's. If you measure income per head in Ireland by dividing the supposed GDP by population you get some fantasy figure in the high $70k region, but if you measure personal *actual* income you get a number pretty close to that of the UK.

13. jon iivesey , Friday, January 05, 2024, 18:30:

8. KB , "One of the Brexit benefits was going to be that global corporations wouldn't be able to shift profits around within the EU and avoid paying UK tax." Eh? Brexit was supposed to prevent international companies from changing their tax residency? How could it possibly do that?

14. KB , Friday, January 05, 2024, 20:15:

jon livesey (13): it was certainly something I saw. There was even a briefing document on it.
When we buy something off Amazon, the profit goes to Luxembourg. This has not changed and we were told it could be changed by Brexit.

15. gazzablack , Friday, January 05, 2024, 21:14:

A.
Jan 2021: Dutch police confiscate ham sandwiches from British truck drivers
Jan 2024: Dutch flower growers beg the UK govt to delay physical checks as it will hurt their businesses
.
Dutch flower growers association VGB have written to the UK govt, begging them to not introduce physical checks at the border until 2025 as they're not ready and it'll hurt their business.
Oh and also they say the UK has "Europe's most efficient border".
.
.
B,
Berlin, Sept 12 (Reuters) - Foreign Direct Investment in Germany slumped to 3.5 billion Euros in the first half of this year from 34.1 billion in the same period in 2022, Bundesbank data shows.
This is the lowest FDI in almost 20 years and points to a loss of attractiveness of the country as a business location. the Germany Economic Institute said separately.
.
.
C,
18 EU states have seen no growth per capita since the founding of the Euro 20 years ago.
For Italy for instance, membership of the single currency has coincided with an unprecedented period of economic stagnation - the country is scarcely any richer in per capita terms than it was a quarter of a century ago.
A similar but much wider stagnation has settled on the eurozone as a whole since the financial crisis. But for the rapid, catch-up growth in relatively low income accession states, the aggregates would have looked even worse.
.
D,
Influential Polish daily Rzeczpospolita is leading the charge for the country’s entry into the Eurozone. However, recent polls indicate that around 65 per cent of voters are opposed to adopting the euro.
.

16. gazzablack , Friday, January 05, 2024, 21:32:

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17. The Brexit Facts4EU.Org team , Saturday, January 06, 2024, 09:04:

Comments 3 (John Jones) and 11 (Jon Livesey)
You are more than welcome to go elsewhere if you don't like our content. As far as we're aware neither of you have ever contributed to the costs of our operation, yet you post here daily.

18. Adam Hiley , Sunday, January 07, 2024, 11:21:

We have only regained our Sovereignty let's not risk it by voting in serial opportunist Starmer the Conservatives must throw out Sunak He has no mandate or business being in office it was Boris Johnson who one the 80 seat majority not Sunak and Hunt, the best outcome for the Conservatives is to remove Sunak there worst leader since Theresa May in 2016, if people want a SDP or Reform Government then the voting system will need to change

19. John Jones , Sunday, January 07, 2024, 11:21:

17. The Brexit Facts4EU.Org team
Fact - I have contributed in the past albeit not in the past 3 and a bit years. I'd check your accounting software.

19 comments, page 2 of 2

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