London’s Low Tax Rate Lures Foreign Companies


According to this article, London’s corporate tax rate is down to 23%, from what was a high of 30% in 2008 that started a trend of decline to 28% in 2010, and will further drop to 20% by 2015.   Unbeknownst?  That will probably put London in the same category as what are considered “low tax jurisdictions”.   Just over 10 years ago, this would have been unthinkable for the United Kingdom, where I recall tax was high and a challenge for corporations and individuals.   Now, it is becoming comparable with competitive tax jurisdictions, such as Switzerland with 18%, Singapore with 17% and Hong Kong with 16.5% in corporate tax rate.    At 20%, it will be lower than Netherlands’ 25%, Germany’s 29% and France’s 33%.  This is working in attracting corporations to establish headquarters or corporate presence in London.

It is pitched in the article as intended to better position London from over-reliance on the financial sector which is in decline.   A well-calculated move, it seems, though it is probably worth-mentioning that London still holds its spot as the top global financial centre, as it consistently ranked first or in the top three in surveys/reports for example the Global Financial Centres Index published by the Z/Yen Group.  London still leads in the most recent GFIC report issued at the end of September.    In all probability, the lower tax rate which adds to the city’s competitiveness and attraction to businesses would help reinforce London’s position as international financial centre – a winning strategy overall.

The article also points out some potential dangers – that the opposition labour party will seek to reverse the tax cuts if it gains power, and there is uncertainty around whether U.K. will continue to remain part of the E.U.   However, since the financial regulatory landscape in the world continues to evolve and the broader ramifications are like shifting sands, it is not surprising for companies to opt to seize the immediate advantages now over holding out for the unknown.

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