Transcript - Episode 4: The tax factor

Start adding items to your reading lists:
or
Save this item to:
This item has been saved to your reading list.

Gaenor Bagley: Welcome to the latest in our series of Beyond Brexit podcasts. Today we are discussing Tax policy in light of the Chancellor’s recent budget and the imminent triggering of Article 50. I am Gaenor Bagley, PwC’s Head of Corporate Purpose and I also Chair our EU Steering Committee, and I am joined by Stella Amiss, PwC UK’s Tax Leader for Policy, Reputation and Regulation. So Stella, how did the Chancellor lay the groundwork for Brexit in the recent budget and what are the key takeaways for business?

Stella Amiss: Thank you Gaenor. I say that this budget was actually one where the ambition of the Chancellor was to try and keep everything stable and to try and demonstrate that it was a good, open environment for UK and for UK business. There were no major changes, especially in the Corporate Tax kind of world, again a key indicator for business that stability was the key. There were though indicators of where things might change in the future. Now clearly the Chancellor tried to make a change when it came to the National Insurance regime and whilst that has been unwound, it’s still an area that is ripe for reform and no doubt we will see changes coming in the future. I would say that the Chancellor this time round deliberately kept his cards close to his chest, just to wait and see how the landscape changes post the triggering of Article 50.

Gaenor: So there was a hint that he might be taking a much more reformist bold measure that he somehow then step back from, would there be another opportunity say for example as part of the industrial policy to continue to innovate and transform a tax system?

Stella: Absolutely. First of all, let’s not forget that this is just the first budget of two that we’ll get this year so there is another budget coming in the autumn and that’s possibly why the Chancellor reigned back quite a lot on what he was going to do this time round, and in all respects that’s actually very sensible. Once we get the triggering of Article 50, we’ll then have a different landscape that we’re playing in, so I think it was right for the Chancellor to stand back and wait. We’ve also had pre-announcements that all the big things they’re considering so, for example, looking at the way we tax workers in the future, that will be subject to big consultations where all of the stakeholders will get to have a say so there’s lots more opportunities to do that but the industrial strategy could actually be key. There’s lots of different areas and focuses that the Chancellor and the Government want to achieve on the back of that and Tax has quite a big role to play. Tax can be quite instrumental, it can influence investment in certain areas, it could potentially have more scope to help different industries, all of which will play out quite a lot over the course of the next two years so I for one was quite glad that the Chancellor didn’t make any rash decisions in this spring Budget.

Gaenor: Yes, you paint a picture that’s absolutely quite complicated actually, so you think of all the streams of the industrial policy, I’m sort of thinking no wonder he didn’t mention Tax because how realistic is it that we’ll be able to come up with something that sort of hangs together across all the various themes?

Stella: It’s a really good question and it’s something that we’ve been looking at in quite some detail. I think as you saw from the changes that were announced on National Insurance, making even small changes can have big repercussions and that’s part of the problem in trying to get a Tax policy straight for the future as we’re going to see it. If you make small measures to try and achieve one part of the industrial strategy it could have a big knock-on impact somewhere else, so actually one of the things you could do is stand back and say well the whole system needs to be looked at again and in some respects this is a great time to do that, there’s a blank canvas, we know we’ve got a new future, we should be getting fit for the future, but actually it could also be the worst time to do that. We’ve got lots of things to deal with and lots of change so really to be practical we might want to stand back and say well I want to focus on the really key areas from a tax policy perspective that could make a real change, and hopefully that’s what we’ll see the Chancellor and the Government do in their consultations over the summer.

Gaenor: Yes that’s interesting because I was thinking as well from a business perspective, there could be a lot of change, the blank pieces of paper all rules change, can you see some areas that are really, really ripe for reform. We mentioned working policies, is there anything else that your bets would be on, that would be the first place he will go for?

Stella: Well I think we’ve signalled quite a lot of times that we want to make sure that the UK is an open business economy and still attractive for investment, and there’s lot of change going on in the Global landscape so looking at not just the tax rate, because we all know the different debates around the tax rates, but looking at the tax base and what things are motivating people to set up business in the UK and keep businesses here in the UK, so helping people with their labour forces, helping with skills, helping different regions because we’ve got a devolution agenda to be looked at as well, those I think are some of the key areas that could actually make a big impactful difference quite quickly in terms of the agenda.

Gaenor: And we’ve talked before I know you and I about whether it makes sense to have more a kind of place base tax policy, you know as you mentioned it, the industrial policy talks about place, you talk about different skills, is that really going to be too complicated do you think?

Stella: Personally I would think in the timeframe we’re looking at – yes. I think it would be much better to stand back, look at what they’d like to achieve and then focus on the key areas and I think a lot of that should come out through consultation. Part of the issue is that we don’t yet know what those key areas are going to be. It might be financial services, it might be an industry, it might be a region, and I think until they start talking to all the stakeholders in earnest as they think through the consequences of Brexit, they really won’t know that.

Gaenor: So does that take us to an opportunity for business in the sense that should they be talking to their MP, going through their trade bodies about what the tax system could do for them going forward?

Stella: Absolutely. So I think, again on the back on the industrial strategy, the Government are looking for input. Now the industrial strategy was very light on tax policy and often the debate ignores tax policy, but tax can have a real impact so I think it’s really important for businesses to articulate whether it be to their trade bodies or directly to Government what will make a bigger difference for them, so it could be played out when the Government are looking at the landscape overall.

Gaenor: That’s really helpful, so there are some clear messages there aren’t there, that although we had a sort of steady as you go budget, we’re still going to see some changes going forward and businesses should think about how they want to implement those changes.

Stella: Absolutely. It’s a listening Government and they’re clearly demonstrating that they’re listening so now is the time for businesses to have that voice.

Gaenor: That’s a really good point to end on. So thank you Stella for your insights and for listening everyone. We’ll continue to discuss these issues in more detail over the coming weeks. For more insights from PwC on Brexit please visit pwc.co.uk/brexit

Follow us