14 October, 2010
New report shows the importance of a predictable and
competitive tax regime in attracting international business to the
UK
The City of London Corporation will tomorrow release a report –
‘Taxation of the Financial Services Industry: Predictability and
Competitiveness’ – assessing the way in which the predictability
and competitiveness of the UK tax regime impact upon the financial
services industry.
Using both quantitative and qualitative analysis, the City of
London-commissioned report - produced on behalf of the
International Regulatory Strategy Group and compiled by Charles
River Associates - contains a comprehensive set of recommendations
to help the UK government achieve its stated aim of creating a more
competitive tax regime.
Stuart Fraser, Policy Chairman at the City of London Corporation
and Deputy Chairman of TheCityUK, commented:
“The UK, and London in particular, has historically been seen as
an attractive business environment in which to locate; top firms
and top talent from around the world have always wanted to be based
here.
“However, this report – the first of its kind since the
financial crisis – shows that the uncertainty of interpretation and
of predictability of the UK tax regime is having a severe impact on
perceptions of those who make the decisions on new investment in
global financial services which remain critical for the success of
the UK.
“Some progress has been made since the City of London last
published this report in 2008, not least with regards to the
Customer Relationship Management system adopted by Her Majesty’s
Revenue and Customs in recent years.
“Unfortunately, this progress has not been matched in areas such
as predictability or competitiveness.
“Whilst the scale of overall tax burden is a key consideration,
it is clear from this report that our top priority must be to
restore the perception of predictability and certainty that has for
so long underpinned the UK tax regime.
“Given the major changes in the political, business and social
climate over the past 18 months, a degree of uncertainty is
understandable.
“But these concerns are not new; as firms start to adopt
long-term business plans to succeed it is up to all of us to
demonstrate that the UK is not only open for business but that as a
global centre it is open to business and that it will remain open
to business for the foreseeable future.
“The financial services industry stands ready to work with the
government in order to achieve our shared objectives of delivering
fiscal balance whilst also helping to drive the UK towards a
strong, sustainable and diverse economic recovery.”
The competitiveness of the UK tax regime has been identified by
the City of London’s International Regulatory Strategy Group (IRSG)
as a key priority. This project has been supported by a Tax
Working Group of the IRSG, with its conclusions having been tested
by a wide range of practitioners, major trade associations and
taxation experts.
Much of the data contained in the report is drawn from extensive
interviews with 26 senior representatives from firms across a wide
range of sectors within the financial services industry.
Some of the key findings contained within the report include:
Positive features are recognised in the approach of HMRC’s
developing commitment to early, effective and consistent
consultation on tax matters whilst day-to-day involvement with tax
officials is also seen as good. This is a positive
development to have emerged from the previous government’s Varney
Review.
However, a review of the last three years shows a large number
of highly significant and unexpected “tax events” such as the
payroll tax, the bank levy, the increase in the top rate of income
tax to 50%, and a variety of other changes increasing
uncertainty.
Such a multiplicity of recent and potential tax measures facing the
sector, especially banks, gives an appearance of lack of fiscal and
regulatory coordination.
The impact of the tax regime is spread across all sectors within
the UK economy although the greatest weight of change has been felt
by the banking and investment banking sector.
Concerns are wide ranging and include such issues as the overall
tax burden, the cost and complexity of compliance and the attitude
of tax authorities relative to other regimes.
The position on tax certainty is demonstrated to have
deteriorated and to be of critical concern for all respondents in
determining the attractiveness of London as a place for
business
Ends
Notes to editors
About the City of London Corporation:
The City of London Corporation is a uniquely diverse organisation.
It supports and promotes the City as the world leader in
international finance and business services and provides local
services and policing for those working in, living in and visiting
the Square Mile. It also provides valued services to London and the
nation. These include the Barbican Centre and the Guildhall School
of Music & Drama; the Guildhall Library and Art Gallery and
London Metropolitan Archive; a range of education provision
(including three City Academies); five Thames bridges (including
Tower Bridge and the Millennium Bridge); the Central Criminal Court
at Old Bailey; over 10,000 acres of open spaces (including
Hampstead Heath and Epping Forest), and three wholesale food
markets. It is also London’s Port Health Authority and runs the
Animal Reception Centre at Heathrow. It works in partnership with
neighbouring boroughs on the regeneration of surrounding areas and
the City Bridge Trust, which it oversees, donates more than £15m to
charity annually.
About the City of London International Regulatory Strategy Group
(IRSG):
The IRSG Members represent industry sectors including investment
banking, asset management, insurance, legal and accountancy
services, exchanges and market infrastructures active in the City
of London. The IRSG seeks to Influence the shape of
regulation nationally, regionally and globally to help create a
regulatory regime promoting open, competitive and fair capital
markets that support sustainable economic growth across the
world. The group assists the continuing development of the UK
- and in particular, the City - as an international financial
services provider and an international market place. In this way,
it complements the activities of participants such as financial
services providers, trading platforms, infrastructures and trade
associations. The IRSG also identifies issues where a
collective position can add value to the existing industry views
and produces high level papers proactively and in response to
specific consultations. It also engages in a regular dialogue with
key decision makers, both domestically in the UK and through the
City Office in Brussels at the EU level.
About TheCityUK:
Formed with the support of the City of London Corporation, the
government and the UK financial services industry, TheCityUK is
independent and politically neutral.
TheCityUK’s strategic priorities are set by the board of
directors, chaired by Stuart Popham, Senior Partner at
international law firm, Clifford Chance. Oversight is provided by
the Advisory Council, chaired by Sir Win Bischoff, Chairman of
Lloyds Banking Group.
The work of International Financial Services London (IFSL) has
been integrated into TheCityUK.
TheCityUK’s objectives are to support the UK financial and
professional services sectors:
Overseas - by promoting the UK in overseas markets as a world-class
centre for financial services
At home - by building a deeper pool of support for the financial
services industry and its contribution to the wider economy and
society as a whole.
In regulation and market access negotiatons - by providing a
voice for the sector and working to improve access to overseas
markets for UK firms.
Press contacts
James
Abbott
Tel: 020 7332 1754
Mob: 07831 542 856
Email:
james.abbott@cityoflondon.gov.uk
Sanjay Odedra
Tel: 020 7332 1835
Mob: 07831 543188
Email:
sanjay.odedra@cityoflondon.gov.uk