April 18, 2013 6:14 pm

Treasury uses tax levels to woo US groups

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A pedestrian outside the HM Revenue & Customs building in Whitehall, London, Britain, 27 May 2009. Downing Street has said that ministers named in the Daily Telegraph "appear to have honoured their tax liabilities". More than 40 Labour ministers were reimbursed for help with tax returns. HMRC is understood to be looking at MPs' tax returns.©EPA

The Treasury has stepped up its marketing of Britain as a “respectable” low tax country in a series of high level meetings with US businesses that played down the recent political row over avoidance.

David Gauke, exchequer secretary, last week told US companies that the government had stuck to its plans in spite of public anger over corporate tax planning.

“Since the controversy about large corporations and tax broke last year, we have twice announced further cuts in corporation tax,” he said.

He told West Coast businesses that their ideas and intellectual property would be “taxed lightly” in Britain. But he said the UK was not a tax haven and had a “stronger reputation for respectability than some of our competitors” because it did not strike preferential deals with individual taxpayers.

Britain’s attempt to woo US businesses is a sign of intensifying competition for inward investment following the decision to cut the corporate tax rate to 20 per cent by 2015. The cut signalled the government’s intention to stick to its policy of creating a business-friendly tax system, despite a public backlash after MPs accused Starbucks, Google and Amazon of avoiding tax last year.

Mr Gauke said the UK was determined to tackle aggressive behaviour and “we do not expect businesses to pay no or very little tax altogether”.

Matt Ryan, a tax partner of PwC, the professional services firm which took part in the discussions, along with senior officials from the Treasury and HM Revenue & Customs, said businesses, largely from the technology, insurance, oil and gas sectors, were interested in moving key operations to the UK.

A handful of high profile businesses, including WPP, UBM, Aon, Rowan and Seadrill, have moved head office functions to the UK in recent months. Mr Ryan expected about 15 more to move in the next year.

A recent survey by KPMG, the professional services firm, put Britain ahead of low-tax rivals such as Ireland, Luxembourg and Switzerland as multinationals’ favourite tax regime. The flow of foreign direct investment into the UK rose 7 per cent in 2011, according to a UN report, but this was not enough to prevent it slipping from fifth to seventh in the global league table of recipients.

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