Market leading insight for tax experts
View online issue

Press watch: Countries slow race to bottom on tax competition

printer Mail

According to the Financial Times (4 May 2014), the proposed takeover of UK-listed drug group AstraZeneca by Pfizer of the US has reignited the debate over tax competition between countries.

A study by KPMG, the professional services group, published last week, found that nearly one in six countries had cut their corporate tax rates over the past 15 months, but that the size of the cuts was smaller than in the past.

Commenting on the report, Chris Morgan, a partner at KPMG, said rates appeared to be levelling off, marking an end to what economists have described as the ‘race to the bottom’ on corporate tax. ‘There is a natural level below which they are not going to fall below, which appears to be around 20%.’ But there are signs of intensifying tax competition aimed at mobile profits, such as royalty payments on patents which can be easily moved between countries. The UK , for example, has joined a number of other countries to compete for this income through its ‘patent box’, which charges a 10% tax rate on income earned by certain types of intellectual property.

Pfizer has expressed an interest in using the patent box following its proposed acquisition of AstraZeneca, renewing debate over the UK’s business friendly tax regime.