New UK Minister of Investment Scraps Proposed Taxes for Gulf Sovereign Wealth Funds

Lord Dominic Johnson, appointed minister for investment in the UK’s Department for Business and Trade last month, revealed he is scrapping all SWF taxes, underpinning the importance to Britain of Gulf-based funds

Dubai, United Arab Emirates – 29 March 2023: The UK’s investment minister has highlighted the recent decision to scrap plans to impose a tax on Gulf sovereign wealth funds (SWFs) investing in the country as evidence of the importance the British government places on such funds.

“I’m personally very pleased that we’ve decided to maintain the status quo,” Lord Dominic Johnson, who was appointed minister for investment in the UK’s Department for Business and Trade last month, told Arabian Gulf Business Insight (AGBI). 

“Our collaborative relationships with Gulf sovereign wealth funds are very important to the UK and our decision not to tax them has sent a very powerful signal around the world of the value that we place on our partnership with these pools of capital.” 

If approved, the plans would have required SWFs to pay corporation tax on property and commercial enterprises and would have come into effect in April this year. 

The plans were abandoned after a government-led consultation led to cabinet warnings that the move would hit inward investment. 

Johnson also ruled out the possibility that any such tax could be reinstated in the future. 

During a wide-ranging interview with AGBI, he said: “We won’t be reviewing this again. We need the investment and how better to have it from these organisations who are truly our long-term partners and whose interests are aligned with ours.” 

Gulf SWFs have recently assumed an even greater investment role in the UK, however, a UK-Gulf free trade agreement (FTA) deal is regarded as the big prize.

UK government analysis shows that an FTA with the GCC is expected to boost trade by at least 16 percent, add at least £1.6 billion a year to the British economy and contribute an additional £600 million or more to UK workers’ annual wages.

The UK-GCC FTA talks commenced in June last year. The third round of these talks took place in the Saudi Arabian capital Riyadh in mid-March, with technical discussions held on 13 policy areas over 30 sessions.
According to a UK government trade update, draft treaty text was advanced across the majority of chapters, with the fourth round of negotiations expected to be hosted by the UK later this year. 
“The talks are progressing very well,” said Lord Johnson. “However, as you get closer to the final wire, you have to deal with the more contentious aspects.