The Treasury hint at reduction in WDA.
As part of an interview with the FT, Mr Gauke who was talking specifically about the diverted profits hinted at a future reduction in the 18% writing down allowance.
He commented that plans to cut the corporate tax rate by a further 2 percentage points would “send a clear message” about the UK’s competitiveness, underlining the rate cuts of the previous parliament which had served as a “great shop window” for the country. Many companies and tax advisers see it as a pre-emptive move aimed at preserving the UK’s competitiveness after it tightens its tax rules in line with the international crackdown on tax avoidance.
Lowering corporate tax is one of the best ways to drive economic growth, The Treasury argues. But academics at Oxford university contend that other elements in the tax code are more important for investment in assets and technology. The tax relief for capital spending is among the least generous of any industrialised country.
The Treasury rejected the criticism, saying it thought the Oxford experts placed too much weight on capital allowances and not enough on headline rates. Mr Gauke said: “There are large numbers of companies locating more activities in the UK. They are not going to shout from the rooftops that tax is a particular driver for them but nonetheless if we didn’t have a competitive tax regime we wouldn’t see that investment.”
An 18 per cent (WDA) rate was “very competitive” but it would be foolish to think it would not ever fall further. Mr Gauke said the international crackdown on avoidance was likely to result in more competition on the tax rate because it would be harder for companies to find other ways of cutting their rate. “A competitive corporation tax rate will matter more in the future than it has in the past. That underlines how right we have been to bring our rate down over the last five years.”
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