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CT cuts 'will not attract business to UK'

Multinationals doubtful about Budget changes

Less than a fifth of multinationals in the UK believe the corporation tax (CT) changes made in the Budget will go far enough to make the country more appealing to businesses, according to PricewaterhouseCoopers (PwC).

Chancellor George Osborne last week announced a cut in CT among his so-called emergency moves to address the national deficit. From next April, the main rate will reduced by 1% each year until it reaches 24% in 2014. The small companies’ rate, currently 22%, will become 20% on 1 April 2011.

To counteract the cost of the cuts, the Budget trimmed the rates of capital allowances. From April 2012, the rate for most plant and machinery will drop from 20% to 18%, the rate for long-life assets will fall to 8% from 10%, and the annual investment allowance will be quartered to £25,000.

In a survey conducted by PwC, 55% of multinational companies from the pharmaceutical, oil and gas, banking and technology sectors agreed that Mr Osborne was right to fund the CT decrease through a reduction of capital allowances.

But only 18.52% of respondents said they believed a lower CT rate will make the UK a more attractive place from which to do business and stem the flow of emigrating taxpayers – and 19.75% suggested the measure will encourage companies to come to the UK.

However, more than half (57.5%) agreed the Budget was generally good for business and that the Chancellor’s proposals constituted were a realistic and achievable plan to restock the public purse – although those polled were less eager to commit as to whether the Government’s measures will deliver economic growth, with 49% not sure and just 17% confident that the Budget changes will lead to recovery.

‘The real test is the one to be tackled in the next two years, delivering a sustainable and competitive regime for the taxation of overseas profits and returns from intellectual property,’ said Barry Murphy, PwC corporate tax partner.

‘There were no super-charged tax incentive measures in the Budget, but rather a clear commitment to a more stable and well-thought-through business tax plan. That will inevitably take time to develop, but the poll results show that pace of consultation and reform needs to be kept up.’

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