| 2011 |
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G20 Corporate tax ranking 2011
The UK government has stated that it aims to ‘create the most competitive corporate tax regime in the G20’. In support of this aim, it has announced that it intends to reduce the main UK corporation tax rate from 28 percent when it took office to 23 percent by 2014.
This report assesses the current competitiveness of the UK corporate tax system relative to other G20 countries. We measure competitiveness using two widely employed indicators: the effective average tax rate (EATR) and the effective marginal tax rate (EMTR). Theory and empirical evidence indicate that the EATR is relevant for the location of discrete investment projects, while the EMTR is relevant for the level of investment, given its location. Both the EATR and the EMTR depend on the statutory tax rate and the definition of the tax base; the EMTR depends more heavily on the tax base.
These measures are based on an analysis of the parameters of the corporation tax regimes in each of the G20 countries. Our key findings for 2011 are that:
the UK has an EATR of just over 26 percent, which ranks the UK 9th of out the 19 independent G20 countries (excluding the European Union), and
the UK has an EMTR of just under 23 percent, which ranks the UK 15th out of the 19 countries.
The weaker position of the EMTR is due to the fact that, although the UK tax rate is relatively low by international standards (in 7th position), the UK is the least generous G20 country with respect to allowances for capital investment. Recent tax reforms that have reduced allowances have tended to raise the EMTR , despite corresponding cuts in the tax rate.
The tax reforms proposed by the government to take place between 2011 and 2014 will improve the competitiveness of the UK tax system, if the other countries do not change their tax systems. In this case, the UK would rise to 5th in the EATR ranking, and 14th in the EMTR ranking.
But the trends of the last decade suggest that other countries will also change their tax system. Since 2002 the UK has lost competitiveness to other countries. The UK was 4th in the EATR ranking in 2002. It fell to 9th in 2011, despite a small reduction in its own EATR as the main rate was cut from 30 percent to 28 percent. However, most other G20 countries reduced their EATR more aggressively than the UK. For the first time in ten years, in 2011 the UK EATR exceeded the average of other G20 countries.
This trend is even more dramatic for the EMTR , where the UK was below the G20 average in 2002 and is far above this average today. The reduction in capital allowances contributed to raising the UK EMTR from 20 percent in 2002 to 22.8 percent in 2011, despite the reduction in the tax rate.
These results suggest strongly that reforms that cut the tax rate but also cut allowances are not enough to maintain, let alone improve, the competitiveness of the UK corporate tax system. Such reforms mainly redistribute the tax burden between companies, rather than making the tax system as a whole more competitive. The government has also emphasised its intention to make the UK more attractive as a location for manufacturing. For that objective, a policy of cutting capital allowances is misguided.
Overall, our results suggest that the UK corporate tax system has lost competitiveness during the last decade. Reversing this trend and making the UK corporate tax system the most competitive in the G20 is a very ambitious objective. To get anywhere near achieving it, UK corporate tax policy has a long way to go.
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Transparency in reporting financial data by multinational corporations
Report of a group chaired by Michael Devereux
In its first meeting in May 2010 the OECD Informal Task Force on Tax and Development identified the issue of transparency in financial reporting as being potentially important in helping development efforts in lower income economies, on the grounds that greater transparency could provide necessary information for holding both governments and multinational enterprises more accountable regarding tax revenues and payments.
This report was commissioned by the Task Force, with a view to examining in more detail the case for greater transparency. The report was submitted to the Task Force for its meeting in April 2011.
There are already in the public domain a number of initiatives to promote greater disclosure of tax information by multinational enterprises. The report reviews and discusses them, as well as the central issues involved in the debate about transparency in financial reporting. It tries to answer some of the fundamental questions about the objectives of greater transparency, how it can be better achieved at least cost, and to what extent it could achieve its objectives. The purpose of this report is to identify and clarify issues, and not to take any positions or to make recommendations.
The report is the product of a group, chaired by Michael Devereux, Director of the Oxford University Centre for Business Taxation. The group included representatives of the OECD , business, NGOs and academia. The group also received comments and advice from a broader group, the OECD Sub Group on Transparency in Reporting Financial Data by Multinational Corporations.
This report reflects a broad consensus amongst the group regarding the issues involving transparency of reporting by multinational companies. The report does not represent the views of the Oxford University Centre for Business Taxation, the OECD , or any other organisation.
The Group responsible for the preparation of this report consists of:
Mary Bennett OECD
Michael Devereux Oxford University Centre for Business Taxation (Chair)
Judith Freedman University of Oxford
Martin Hearson ActionAid UK
Chris Lenon Rio Tinto
Glen Loutzenhiser University of Oxford (Secretary)
David McNair Christian Aid
William Morris GE
Richard Parry OECD
Douglas Shackelford University of North Carolina
Susan Symons PricewaterhouseCoopers
Roberto Schatan OECD (Secretary)
In addition, the Group received support and advice from:
Sameena Arshad KPMG
Asim Siddiqi PricewaterhouseCoopers
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The economic effects of EU-reforms in corporate income tax systems
Study for the European Commission Directorate General for Taxation and Customs Union
Joint report with the CPB Netherlands for Economic Policy Analysis
This report adopts an applied general equilibrium model for the EU27 to study the economic implications of a common corporate tax base in the European Union, either or not combined with consolidation and formula apportionment. The analysis of the common corporate tax base (CCTB)centres around the issue of base broadening versus rate reduction. It emphasises the trade-off between, on the one hand, a low effective marginal tax rate, which minimises distortions in investment and, on the other hand, a low statutory corporate tax rate, which minimises multinational profit shifting to outside locations.This report adopts an applied general equilibrium model for the EU27 to study the economic implications of a common corporate tax base in the European Union, either or not combined with consolidation and formula apportionment. The analysis of the common corporate tax base (CCTB) centres around the issue of base broadening versus rate reduction. It emphasises the trade-off between, on the one hand, a low effective marginal tax rate, which minimises distortions in investment and, on the other hand, a low statutory corporate tax rate, which minimises multinational profit shifting to outside locations.
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Corporation tax in the United Kingdom, March 2011
This report presents new information on the anatomy of corporation tax liabilities and payments in the United Kingdom. It uses two complementary company-level data sources: anonymised corporation tax data provided on a confidential basis by HMRC, and financial accounting data from the FAME database. Each data source has advantages and disadvantages, but by combining them we are able to provide a detailed description of the distribution of corporation tax in the United Kingdom.
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| 2010 |
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Effective levels of company taxation within an enlarged EU, Brussels: European Commission, with Christina Elschner, Dieter Endres and J Christoph Spengel
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| 2009 | top |
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Tax evasion, tax avoidance and tax expenditures in developing countries: A review of the literature, June 2009
Research carried out for the UK Department for International Development (DFID).
Abstract
This report reviews existing empirical work on the impact of tax evasion and tax avoidance on tax revenue raised by developing countries.
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| 2008 | top |
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Alternative Systems of Business Tax in Europe: an applied analysis of ACE and CBIT reforms, November 2008.
Research carried out for the Directorate General Taxation and Customs Union of the European Commission.
Abstract
This report explores the economic implications of an allowance for corporate equity (ACE), a comprehensive business income tax (CBIT) and a combination of the two in the EU. We illustrate the key trade-offs in designing ACE and CBIT in the presence of tax distortions at various decision margins of firms, such as its financial structure, investment, profit allocation and discrete location. Using an applied general equilibrium model for Europe, we quantitatively assess the effects of ACE, CBIT and combined reforms in EU countries. The results suggest that ACE is welfare improving as long as corporate tax rates are not used to cover the cost of base narrowing. CBIT typically reduces welfare by exacerbating marginal investment distortions. When governments adjust statutory corporate tax rates to balance their budget, however, CBIT reforms become more attractive while ACE reforms are welfare reducing in a number of countries. European coordination of reforms mitigates fiscal spillovers within the EU and renders ACE reforms more, and CBIT reforms less, attractive for welfare. A combination of ACE and CBIT reforms can be designed to be revenue neutral and welfare improving through smaller financial distortions.
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European Commission Taxation and Customs Union website >
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Effective tax rates on investment in the EU, 1998-2007, 2008
Research carried out for the European Commission
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Comparing practices in R&D tax credits evaluation, 2008
Research carried out for the European Commission
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| 2007 | top |
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Moving Beyond Avoidance? Tax Risk and the Relationship between Large Business and HMRC, June 2007
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| 2006 | top |
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Interest Deductibility for UK Corporation Tax , December 2006.
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