The future of tax - what do businesses think?

There's a lot of discussion about how Brexit will affect the UK and the way we do business.  The EU Referendum result has also put a spotlight on business' role in society more generally.  Tax has an important bearing on both these issues, so we brought together a cross section of businesses to discuss priorities for reform.  After a lengthy debate, facilitated by Katie Derham, the 'jury' presented its conclusions to representatives from Treasury and HMRC.  

Here’s what the jury told us:

  • The UK’s changing relationship with Europe provides an unparalleled opportunity to reshape the tax system.
  • The rate of corporation tax is not the be all and the end all. While some participants supported a lower rate, others felt the rate was sufficiently competitive and a further reduction would not help build more trust between business and the public.
  • There needs to be more focus on the ‘big three’ taxes – income tax, NICs and VAT – which contribute two thirds of the country’s total tax revenue, while Corporation Tax contributes around 7%.
  • Tax should be used to encourage behaviour that’s beneficial to the country as a whole and not any one industry or region.
  • The tax regime should actively encourage the growth of domestic companies – particularly those SMEs that have the potential to grow to businesses that employ 250 employees.
  • A new specific and independent HMRC department should be established with the sole purpose of helping SMEs identify and access the incentives available.
  • While it is important to attract businesses to all parts of the UK once regional European funding is no longer available, there is real concern that devolution will add more complexity to the tax system.
  • The priorities for the tax system in a post Brexit world are clarity, stability and transparency.
  • It will take a concerted and combined effort by business and the Government to address the deficit in public trust over corporation taxation. Corporate behaviour on tax has changed, and this needs to be better communicated. Moreover, the Jury felt that business and government have failed to articulate clearly the benefits that businesses bring to the UK

So, in a snapshot, what did businesses think about tax?

How tax should be used to shape post Brexit Britain is up for debate. It’s vital the business community is part of this discussion – businesses large and small see the impact of tax every day, and how it interacts with employment and investment.

Kevin Nicholson, UK head of tax

Where next?

So what are the prospects for a fundamental reform to our tax system? The Business Jury recognised forces are coming together which could bring more change than we have seen in recent years: public and political pressure for a system that feels fairer and more transparent; pressure on Government to ensure continued growth nationwide post Brexit; business wanting a competitive, but simpler and more certain system; and technology shaking up how taxes are paid and collected. But will the opportunity be seized? The jury’s still out.

“Brexit moves tax reform beyond the conceptual. It gives us the chance to think afresh about what we – the Government, business and public – want from the tax system.”

Jury participant

Contact us

Marissa Thomas

Head of Tax, PwC United Kingdom

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