George Osborne, the UK's finance minister, says he plans to dramatically cut the country’s corporation tax. In an interview with the Financial Times, he said the rate would be cut to below 15% from its current level of 20%.
Such a move would result in the UK having one of the lowest corporate tax rates of any OECD economy – with only Ireland’s 12.5% likely to remain lower. The latest plan goes further than March’s announcement that corporation tax would fall to 17% by 2020.
Osborne said the cut would build “a super-competitive economy” and make clear that the UK is still “open for business.” Although the UK Treasury confirmed the plans, it is not yet clear when the cut will be implemented.
Where are corporate tax rates lowest?
Corporate tax is levied against a company’s profits earned during a certain period. In many countries it is imposed at a national level, however it can also be imposed at a state or local level.
The following chart shows the lowest corporate tax rates in OECD economies. It is based on their own calculations combining national and local rates, allowing for any surtax on the national rate as a result of a local tax. In the case of the US, a weighted average of state rates is used.
Ireland has the lowest rate, at 12.5%. The low tax level has seen Ireland become a popular location for start-ups and major multinationals, from Facebook to Pfizer.
The UK’s proposed rate of below 15% would see it take second place in the list, just ahead of Latvia. The eastern European nation was invited to join the OECD in May 2016, and has a corporate tax rate of 15%.
Other nations with a rate below 20% include Poland, the Czech Republic and Slovenia.
At the other end of the scale, the United States, France and Belgium have the highest rates among OECD economies, all in excess of 30%.