The UK General Election: A look back at the last five years

The UK has had five years of coalition government, but more strikingly five years when tax has become a daily topic in the media, with multinationals facing a volatile climate of mistrust.

In parallel, and prompted by the G20, the OECD BEPS process has seen international tax change from a rather outmoded caterpillar, and go into a two year chrysalis state.

In the UK, we have seen tax policy taking two routes:

• Tax cuts and incentives – We saw corporation tax cut from 28% to 20%, changes to R&D tax credits and the patent box regime. All of these were aimed promoting the UK as a place to do business.
• Tackling tax avoidance – We saw the introduction of a general anti-abuse rule and measures to take away the cashflow benefit of almost all aggressive personal tax planning schemes.

On the international stage, some see the UK as having jumped the gun. It has taken unilateral action in introducing the new Diverted Profits Tax or “Google Tax” right in the middle of the OECD BEPS 2-year programme aimed at multilateral tax reform.  The OECD’s Pascal Saint-Amans last week described such measures as “populist”.

The tax landscape is much changed from five years ago. Most now see tax transparency and even country-by-country reporting as inevitable, and many businesses are seeing the way they engage with their stakeholders on tax as a vital part of mitigating tax risk.

Going forward, we can expect to see the OECD BEPS chrysalis open up later this year. What that will reveal remains to be seen. It may be a colourful butterfly, a slightly drab moth, or more pessimistically the same old caterpillar. Will the process of metamorphosis have been damaged by being interrupted by unilateral tax measures such as the UK Diverted Profits Tax, and the European Commission work on State Aid?

Of course, the pressing question in the UK is what the General Election will bring. With a hung parliament almost certain, and potentially a multi-party coalition, how the tax policies of the various parties can be pulled together into a workable package is yet to be seen.

Keep an eye out for further posts here over the course of the coming days and weeks as the tax landscape becomes clearer.