UK Elections Lead To Further Uncertainty
I’m still not entirely sure whether last week’s general election in the United Kingdom was a democratic exercise, or a mass psychological experiment, so often did Prime minister Theresa May try and penetrate the electorate’s skulls with the mantra “strong and stable” in the hope they would vote Conservative. If it was, it failed. Weak and wobbly is what they voted for, if anything.
Almost needless to say, these are hardly ideal foundations on which to conduct the Brexit negotiations. Indeed, the whole idea behind the calling of the snap election was to strengthen the position of the Conservative Government, based on a healthy lead then in opinion polls, and by extension the UK’s hand at the Brexit negotiating table.
This episode heaps yet more doubt on the direction of UK tax policy. The 2017 Finance Bill has already become a casualty of the election, and corporate taxpayers will be interested to hear if a number of business-related measures will make it back into the second bill, assuming one is introduced.
Furthermore, the new deliberations about what sort of Brexit the UK should aim for has ramifications for long-term tax policy, since the strength of the remaining ties the country has with the European Union will determine such important things as legal supremacy, the jurisdiction of the European court, existing and future case law, and the applicability of EU tax legislation and regulations, notably in the area of value-added tax.
There is already some evidence that these events are worrying businesses in the UK, which could obviously have repercussions for private sector investment in the country. According to a recent survey by EY, the UK, the US and Australia are now top tax risk jurisdictions as a result of legislative and regulatory uncertainty. And that they’re ranked alongside India and China in the survey shows just how chaotic things have become.
Another ominous sign was the result of the latest monthly business confidence survey from the Institute of Directors, which was published in the aftermath of the election result. This showed that 57 percent of the 700 respondents were either quite pessimistic or very pessimistic about the prospects for the UK economy over the next 12 months, against 20 percent who were optimistic. This translated to a “net confidence” score of -23, whereas last month it was -3.
For more information on this, and other topical international tax matters, please visit: https://www.cchgroup.com/roles/corporations/international-solutions/research/global-tax-weekly-a-closer-look