Sunak minimum tax plan will cost business

RISHI SUNAK’S plan to adopt a minimum corporate tax rate will damage competitiveness and leave Britain stifled by red tape and extra costs, a think tank has warned.

The Legatum Institute urged the Prime Minister not to cede control of the key business tax, after a global agreement to implement a 15 per cent minimum levy on multinational companies.

The report, authored by Matthew Sinclair, Liz Truss’s former chief economic adviser, urged Mr Sunak to use Brexit freedoms to reject the global minimum facilitated by the OECD and “reassert sovereignty over tax policy”.

More than 130 countries, including the US, UK and the rest of the G7, signed a deal in 2021 to tackle tax abuses by some of the world’s biggest companies and establish a minimum global corporate tax rate for the first time.

Joe Biden, the US president, wanted a 21 per cent minimum but agreed to cut this to 15 per cent for companies with annual revenue of at least $750million (£615 million). The Institute said the UK had signed up to the agreement without a vote in Parliament, branding the OECD minimum “a bad idea in principle and an unwelcome departure from a commitment to maintain the UK’s sovereignty over its tax affairs.”

It warned that the UK’s decision to implement the policy faster than other nations would crate “unnecessary” additional costs, leave the UK at a competitive disadvantage and prevent governments from slashing taxes.

Rejecting a corporate tax floor would ensure policymakers could determine the “right corporation tax for the UK,” Mr Sinclair said. The Institute said officials had also “underestimate[d] the cost of implementation” for businesses, warning of compliance costs.

HM Revenue & Customs has estimated that complying with the new minimum tax would cost businesses £13.2 million up front and £8.2 million in annual costs on average. Money would go on updating software, retraining staff and other administrative expenses.

Mr Sinclair said: “It is vital that future governments have the flexibility to set taxes in a way that reflects the UK’s changing economic needs.

It comes as Jeremy Hunt considers giving businesses a £10 billion tax cut in his Autumn Statement.

The Telegraph has reported that the Chancellor wants to extend a tax break known as “full expensing” to boost longterm economic growth. The policy lets companies write-off the cost of investment against their tax bill in one go.

Stephen Phipson, chief executive of Make UK, said: “Long-term capital allowances and full expensing will enable the investment the sector needs and ensure we can attract the inward investment vital for our growth.”