Wrong Taxes, Wrong Time

Wrong Taxes, Wrong Time

The US-based Tax Foundation has released its annual International Tax Competitiveness Index. It places the UK 22nd out of 36 OECD countries, down one place from 2019.

This study measures the competitiveness of all OECD countries by analysing corporate taxes, income taxes, property taxes, consumption taxes, and international tax rules, and assessing how pro-growth these regimes are.

However, joint research by the Centre for Policy Studies and the Tax Foundation has found that if the Government proceeds with its reported plans to raise corporation tax, capital gains tax and dividend tax, the UK’s international tax competitiveness would plummet.

The Treasury is reportedly considering increases in Corporation Tax and Capital Gains Tax in
order to plug the tax gap left by the pandemic, but the immediate need is to focus on growth and recovery – and raising taxes on productive investment, now or in the future, would damage the economy in the longer term

Analysis by the Centre for Policy Studies and the US-based Tax Foundation shows that our business tax regime, despite the low headline rates, is not as competitive as we think and increasing Corporation Tax would put us at a significant international disadvantage

The reported proposal to align dividend tax and Capital Gains Tax rates with Income Tax would leave us with the second-highest top rate on dividends and the highest top rate on capital gains for shares in the OECD.

Implementing all of the reported tax increases would see the UK drop to 30th out of 36 on the Tax Foundation’s International Tax Competitiveness Index – down from 22nd today.

Tom Clougherty - Wednesday, 14th October, 2020