This will please the Treasury: GlaxoSmithKline boss Andrew Witty apparently plans to create 1,000 UK jobs as a result of the Government's new tax regime for patents, according to the Times. The so-called ‘patent box’, which was unveiled by Alistair Darling in December, is designed to entice lucrative tech companies to these shores (or at least stop them leaving) - by creating a special corporation tax rate of 10% for patent income. At a time when most business taxes are going up, it’s a reminder that sensible tax breaks can actually lead to extra revenue...
The patent box certainly seems like a sweet deal: the special rate of 10% is a big discount on the usual 28%, while just as importantly, it makes the UK look like a place that’s welcoming to new business. And although the changes won't actually happen until April 2013, GSK appears to be an immediate convert: Witty reckons it will transform Britain’s potential for attracting investment in life sciences. So hopefully, the patent box will lure fresh blood to the UK – as well as encouraging businesses that are already here not to disappear to foreign climes in search of a kinder tax regime.
The Government will certainly welcome a bit of positive PR on the business tax front. In recent times it's been regularly criticised by industry figures for pushing a tax regime that’s unpredictable and lacks transparency. Indeed, some high-profile businesses - including the pharmaceutical company Shire - have already moved their headquarters out of the UK (booze behemoth Diageo has also been threatening to up sticks lately).
The threat of a corporate exodus has put extra pressure on the Government’s dickie ticker - hence why Gordon Brown and Peter Mandelson have been out wooing the likes of HSBC, Unilever, BP and Axa, trying to reassure them that UK plc still has some life left in it. They’ve been promising a more open and stable tax regime, while pledging to cut red tape. And yesterday the Treasury published a draft tax framework document, to encourage a conversation with business on Britain’s approach to corporate taxes.
It's good to see innovation-friendly tax breaks (albeit only after several other countries have already done it). But business groups may be forgiven for wondering why the Government is suddenly so keen on improving the tax regime, after nearly 13 years in charge - particularly after a period in which lots of taxes affecting businesses (small companies corporation tax, capital gains tax, even the top rate of income tax) have actually gone up. Could it be that there's an election looming?
PS There’s a lot going on at GSK at the moment – so we caught up with CEO Andrew Witty for an exclusive interview in New York recently. Check out what he has to say in next month’s MT...
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