Still a way to go to build the most competitive tax system in the G20

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The government is committed to building the most competitive tax system in the G20. But what does that mean?

I'm doing a bit of thinking about tax policy at the moment and going around the country talking to members about their views to try to come up with some answers about what we think it means. In particular I'm interested in where people see tax policy as needing to be to help support investment in the UK.

Down in the South East on Wednesday I was asking members about various recent tax reforms, here's a feel for some of their thoughts:

Corporation tax (headline rate cut from 28% to 24% and coming down to 22% by 2014/15 to be lowest in G7, fourth lowest in G20)

A lot of people saw the corporate tax cut as 'free money' for large corporate shareholders that wouldn't be re-invested but simply paid out as dividends

Capital allowances (Annual Investment Allowance reduced to £25k from £100k; main write-down rate reduced from 20% to 18%)

Not surprisingly given our vocal commentary on this in the recent past members weren't that happy with these changes. But I thought the discussion on Wednesday helpfully focused in on the key issue for what was primarily an SME audience - cashflow

R&D tax credits (small company rate increased to 225%; large company scheme to be moved 'above the line' and made available to loss makers)

Good support for the R&D tax credit - not as a driver of investment in its own right but as an important incentive to go further.

Again the link was made with investment i.e. credits > improve cashflow > lift investment

A bit of niggle about how difficult the credit is to claim for with consultants creaming off 25% of the value gained.

Tax compliance

General feeling that the government had a way to go on this and that the crack down on anti-avoidance was hitting soft targets rather than the real tax dodgers.


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