SG10 Solutions Blog: Brexit – The UK as an offhore tax haven …?
Ever since the momentus moment on 23 June 2016 when the UK voted to leave the European Union an exhausting plethora of options and senarios have been put forward as to what Brexit would looklike. We have had everything from “hard brexit with a runny yolk”, “a red, white and blue brexit” to “the right deal for the British people”.
It was not until this week where the fog finally seems to be about to clear that the biggest wild card appeared. In an interview with the Chancellor Philip Hammond in the German newspaper Welt am Sonntag last Sunday first mooted the idea of the UK re-positioning itself as a low-tax centre to attract major corporate employers. Hammond, by nature a cautious and conservative chap, made this comments in sharp contrast with the friendly tone that he expressed at a conference for business leaders in Germany the week before. His interview was punctuated by the concluding paragraphs of the Prime Minister’s speech as she said, “No deal for Britain is better than a bad deal for Britain”.
Remaining politically neutral and preferring to keep our flavour of Brexit under wraps it is not for SG10 Solutions to wander into a Westminster debate though it is worth considering the potential impact on such a move on the recruitment market.
The obvious comparators would be Singapore (corporation tax = 17%), Hong Kong (16.5%) and Switzerland (8.5%). It must also be noted that Singapore and Hong Kong are famously lenient on income tax levys.
Singapore and Hong Kong have been very attractive to ex-pat employees in technology and financial services – with the low taxes being key to this. The other key consequence is that technologists in these regions enjoy brilliant salaries compared to neighbouring nations.
However these are the benefits to the ‘ex-pats’. As anybody following the news in the UK would know the Brexit vote was hardly intended to improve pay conditions for those coming to work in the UK from outside.
Naturally the lower corporation tax initiative would potentially attract big employers. The next challenge would be filling these jobs given the huge drive to reduce net migration. As it stands UK unemployment is at an all-time low. This is the type of perfect storm for job seekers whereby demand for technologists far exceeds the supply of them into the market. The natural consequence here is that salaries increase.
However before we get too far ahead and all look to ask for big pay-hikes at our next appraisals let us see what the next few months bring. Every side in this negotiation will have our own poker face. The UK has a population more than 10 times the size of Hong Kong – and a far bigger dependant population. This means that risking a fall in tax revenues against the backdrop of a bulging national debt is something which may cause even the bravest minister to blink.
The next two years promises to be – to say the least – interesting for the technology recruitment markets.