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EC investment policy is about boosting growth and jobs, not “clobbering British firms”

October 12th, 2015
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The European Commission’s proposals for capital markets union have been welcomed by the City of London (for example City UK here) and by SME organisations (for example the Federation of Small Businesses here). They aim to give UK and other European companies better access to finance and provide new investment opportunities both for banks and other financial market players such as venture capital, private equity, “business angels” and crowdfunding.

Meanwhile, the Commission’s investment plan to mobilise € 315 bn in investment that would not happen without such a scheme is being implemented, again with UK support.

One issue being discussed in the UK and across Europe, as well as in Brussels, in connection with the wider issue of investment for growth and jobs, is that companies receiving equity investment – from investors who take a stake in the company and often bring expertise with them, as in the Dragons’ Den TV show – get less help from the taxman than if they merely seek loan (also known as debt)  finance from large banks.

The debate on how this might be addressed is primarily around increasing the incentives for equity investment, rather than removing those for loans, and always in the context of an overall objective of raising viable, job-creating investment as a whole.

The Commission is looking at the issue, though no proposals are yet on the table. Of course, tax changes which increase investment and thus boost GDP and jobs can increase revenue for the Exchequer without increasing the tax burden on business.

For example, leading UK employers’ association the Institute of Directors has called for “an equity economy”.

So Sun on Sunday claims on 11 October in that “5.24m British firms will be clobbered by a Brussels rule change…… to stop firms from claiming tax relief on the cost of loans they take out” simply do not stand up. There is no “EU tax bombshell that could cost businesses £48bn a year” and there will certainly be no “£9 250 per year average bill for every UK company”.

The Commission has no intention of proposing measures that would have any such effect and even if it ever did, tax policy decisions at European level must be taken by unanimous vote of EU Member States: in other words the UK has a veto.

 

 

 

 

EC investment policy is about boosting growth and jobs, not "clobbering British firms", 5.0 out of 5 based on 1 rating

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