Chancellor of the Exchequer George Osborne announced an additional cut in the rate of Britain’s corporation tax in a bid to spur economic growth.
The tax will be charged at 21 percent from April 2014, which Osborne said will be the lowest rate of company tax in any major western economy. He previously planned to cut it to 22 percent in 2014.
“I want Britain to have the most competitive business tax regime of any economy in the world,” Osborne told lawmakers as he delivered his Autumn Statement to Parliament in London. “This is an advert for our economy that says, ‘Come here, invest here, create jobs here, Britain is open for business.’”
The reduction is part of a suite of tax reductions for companies following a report into how best to spur growth by former Deputy Prime Minister Michael Heseltine. It comes amid a controversy over the tax after lawmakers criticized executives from Starbucks Corp., Amazon.com Inc. and Google Inc. for using complex accounting methods to reduce their U.K. tax liabilities.
Osborne said the U.K.’s corporation tax rate compares with 40 percent in the U.S., 33 percent in France and 29 percent in Germany.
Banks will not be allowed to benefit from the reduction in the tax rate and the bank levy rate will be increased to 0.130 percent next year, the chancellor said.
“A cut of 1 percent in corporation tax and a cancellation of a fuel duty hike might grab a headline, but it’s not going to enough to stimulate growth meaningfully, something that our economy so desperately needs,” Angus Campbell, head of market analysis at Capital Spreads in London, said in an e-mailed statement. “There was little he said that will achieve this.”
Companies will also see the annual tax-free investment allowance for plant and machinery increased to 250,000 pounds ($402,000) from 25,000 pounds, while the government plans to create a Business Bank with 1 billion pounds of capital. The small business rate relief program will be extended for a year, until April 2014.
Corporation tax cuts “helped British companies and frankly left other countries scrambling to keep up,” Osborne said. “Countries like ours risk being out-smarted, out-worked and out-competed by the new emerging economies.”