The UK will become significantly less attractive to family-owned businesses after Brexit, even with a further cut in the rate of corporation tax in the UK, according to a survey by the Foundation for Family Businesses.
In view of declining corporate tax rates around the world, German companies fear considerable competitive disadvantages. This situation heightens the pressure on the German federal government to initiate a business tax reform, according to a conclusion drawn by the Annual Monitor of the Foundation for Family Businesses. The 1,250 companies surveyed for the Monitor make this the largest survey on international tax competition, carried out by the ifo Institute on behalf of the Foundation for Family Businesses.
In international competition to attract companies with low taxes, German family businesses could be at a disadvantage. That is the result of a study carried out by the Centre for European Economic Research (ZEW Mannheim) on behalf of the Foundation for Family Businesses. There are three main reasons for this.
Family businesses are the ones that suffer when big corporations with digital business models reduce their tax burdens to a minimum by making systematic use of tax loopholes. That is why it is important to put tax authorities in a position to expose illegal tax practices, while of course maintaining data privacy.
Family-owned companies make a significant contribution to Germany’s economic strength. 91 percent of all companies in Germany are family-owned, among which include many hidden champions. In this respect, family-owned businesses do not place strategic focus on rapid success on a quarterly basis, but rather on continuous growth and long-lasting stability. Authors Rainer Kirchdörfer, member of the Executive Board of the Foundation, and Stefan Heidbreder, Managing Director of the Foundation, discuss this aspect in a joint article.
With just one year to go till Brexit, family businesses and their owners still lack certainty regarding the legal consequences of the UK’s departure from the EU. On 22 and 23 March, the European Council wants to set the course for the further negotiations between the European Commission and the British government on the nature of future trade relations between the two sides. At the moment, everything is pointing towards a hard Brexit.
The Foundation for Family Businesses opposes mandatory publication of sensitive corporate data. “Publishing business secrets online weakens companies and contributes in no way to fair corporate taxation”, says Prof. Rainer Kirchdörfer, a member of the Executive Board of the Foundation for Family Businesses. Governments should agree with the course embraced by the German Federal Ministry of Finance and forestall the EU’s plans. This finding has been confirmed by a study on country-by-country reporting (CbCR) online, which was conducted on the foundation’s behalf by the Centre for European Economic Research (ZEW Mannheim).
