UK's CT rate 'higher than global average'

The UK's corporate tax rate remains higher than the global average of 25.9%, despite a 2% cut this year, according to a new international study by KPMG.

The results of the company's Global Corporate and Indirect Tax Rate Survey 2008 also show that the country's 28% CT rate is almost 5% higher than the EU average of 23.2%.

However, the UK now has the equal-19th (together with Sweden) lowest corporate tax rate of the 27 EU member states: a slight improvement on last year's 21st position.

KMPG UK's international corporate tax head, Chris Morgan, said the significance of the country's CT policy has recently been highlighted by several large companies announcing their intentions to relocate their HQs outside the UK.

'But this is not about the rate,' he added. 'It's about how the UK system is able to tax foreign profits - and the argument is not about whether these profits should be taxed at 28%. It's about whether they should be taxed by the UK at all.'

KPMG's global study shows that while not every nation analysed reduced its headline rate of corporate tax in the past year, for the first time since 1994 not one single country in the 106-strong sample raised its corporate tax rate.

This continued downward pressure on worldwide and European CT rates will present a challenge to UK authorities to find a way genuinely revenue-neutral way to improve the country's tax competitiveness, claimed Chris Morgan.

He added: '[The country] can't afford a tax giveaway, but business will not welcome a major hit in terms of extra taxes.

'The only way to find an acceptable solution is for all parties to really engage in the debate. It's important that the various working groups established have a mandate to make real proposals and are not just talking shops.'

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