A complicated and uncompetitive tax regime will only push companies to where the grass is measurably greener
Great Britain plc does not operate in isolation, and when you least expect or want to deal with it, events overseas can upset all your best-laid plans. This week, we spoke to four insurance ex-pats living the life of Riley, and their stories leave no room for doubt: there are fewer and fewer reasons to stay on these rainy shores, and ever more to head for the sun.
The ABI has already been banging this drum. In a recent report, it revealed the shocking statistic that 71% of the most senior people in the industry have real concerns about the UK corporation tax system; and 52% of insurers would consider packing their bags.
So it’s all the more galling that trade minister Lord Davies dismissed insurers’ concerns out of hand last week, telling them they had “better pay their tax like everyone else”. Well, guess what? The UK insurance market does pay its tax – upwards of £10bn of it every year.
Would the other parties do any better? The Lib Dem shadow chancellor this week tells us that “we mustn’t get in a race to the bottom” on corporation tax (page 20). That’s all very well Vince, but when other territories are actively campaigning for the UK’s precious financial services companies to up sticks, maintaining a dignified and inflexible stance is not going to get us very far.
The Tories’ insurance pointman Mark Hoban made more promising noises this week, telling us that the industry is well placed to avoid over-regulation (news, page 10). The Conservatives have already promised to cut the corporation tax rate by 3% to 25% which, while a welcome gesture, will do little to put the UK ahead of its international competitors, some of which have a zero tax rate.
Of course, these would never be feasible here, but the ABI has outlined several sensible and relatively easy-to-achieve measures that would make the UK immediately more attractive. Among them are exempting foreign branches from tax, overhauling the controlled foreign companies regime, addressing various tax loss issues and cutting personal tax to make those sunny havens a little less attractive.
Politicians of every colour must sit up and listen, and you can be sure that we will be telling them so at Thursday's second Insurance Times Leaders Forum. Watch out for full coverage online and in next week’s issue.