UK Tax Simplification Will Spark Global Reforms in Battle for Inward Investment

The launch of an independent office to simplify the UK’s tax system is a significant signal to multinationals towards freeing them of the tax complexities that act as a sizeable burden both on their compliance systems and day-to-day operations. Taxand calls for this small step in simplification to be embraced by other governments across the globe.

In recent months a number of countries, including the UK, have looked to lower their rate of corporate income tax as a measure to attract foreign investment. However, a number of jurisdictions have wrongly viewed this as the ‘be all and end all’ in terms of attracting investment, when other factors also have a large part to play.

Taxand conducted a survey of its advisors in 20 of the 50 countries where it is present and nearly half (48%) identified complex tax rules and legislation introduced by governments and tax authorities across the globe as the key disincentive in attracting investment. Surprisingly, just 20% believed that high corporate income tax rates were the most important factor in discouraging inward investment.

In line with UK Chancellor George Osborne’s announcement, the survey also identified the clarification of tax rules and legislation by governments and tax authorities as the most effective technique to attract inward investment with 35% of responses relating to such actions.

“Instead of seeing rates of corporate income tax as the primary lever in attracting investment to a region, governments first need to ensure that processes and legislation are made as simple as possible for multinationals that are considering a move to or expansion in their jurisdiction,” said Frederic Donnedieu, chairman of Taxand, a global organisation of tax advisors to multinational businesses. “This announcement in the UK is a welcome first step in the global simplification of tax systems and is likely to fire the gun for other jurisdictions who will seek similar reforms to ensure they are competing on an equal footing for foreign investment.”


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