The government's Plan for Growth in March set out an ambition of making the UK the most competitive tax regime in the G20.This is a really positive ambition. But the ambition jars a little with the reality of some of the policy changes and some of the rhetoric.
The government used a cut in capital allowances to help pay for its headline corporate tax cut. And in the measures included under its Plan for Growth ambition, the ‘lowest corporate tax rate in the G7' appears as a measure.
It all seemed to suggest the focus is very much on corporate tax alone.
For manufacturers, indeed for businesses in general, tax is tax no matter what its label might be. Mobile investors will take into account the complete picture including incentives for R&D, capital allowance regimes, and environmental taxes – as well as main rate corporate taxes.
However, recently there does seem to have been a greater acknowledgement by the government of the breadth its ambition for the most competitive tax regime must have to be credible.
For example in recent consultations on modifying the R&D tax credit, HM Treasury explicitly mentions its ambition for creating the most competitive tax regime.
We now want to see the ambition broadened out further to include the full picture on tax faced by businesses. An important part of this would be creating a measure to demonstrate how the overall burden of taxes faced by businesses is changing – and how that compares with our competitors.
This measure is necessary to not only show progress year-on-year as the government rolls forward its tax reforms but also to help define the success we are aiming for.
By creating this framework we then have something we can hang policy proposals off. And this is what leads me to EEF's recommendations in our submission to the government in advance of the Autumn Statement.
We are looking for reforms that cover a wide span of the tax landscape manufacturers face:
1. We want to see the UK create the most competitive tax regime for innovation
Reforming the R&D tax credit by shifting it ‘above the line' in corporate accounts thus lowering the pre-tax cost of R&D in the UK and increasing the incentive to invest in innovation
2. A shift in our capital allowances regime to accounts depreciation
Matching tax treatment of capital depreciation to accounts depreciation will free up cash flow and help drive faster reinvestment
3. Rationalising the carbon tax landscape
There are too many different carbon taxes and we are pushing too far ahead of our competitors, particularly in energy-intensive sectors. We need to recalibrate how far the UK is pushing on carbon reduction and introduce measures for the industries most severely impacted by policies that reduce their competitiveness