Posted: July 5, 2016
Britain has announced plans to cut corporation tax to less than 15 percent in an attempt to cushion the shock of the country’s decision to leave the European Union, according to Reuters.
Chancellor George Osborne told the Financial Times he wanted to build a “super competitive economy” with low business taxes and a global focus.
The new rate, which was announced without a target date, compares with Osborne’s previous target to cut corporation tax to 17 percent by 2020 from 20 percent now. It compares with an average of 25 percent among most developed economies.
Ireland, where a 12.5 percent corporate tax rate has been a cornerstone of economic policy for 20 years, drawing investors such as Pfizer and Apple, said Osborne’s announcement showed how quickly the EU’s dynamics were changing after the Brexit vote.
“This is a very stark reminder of how the world is changing as a result of the referendum result in the United Kingdom,” Public Expenditure Minister Paschal Donohoe told RTE radio.
“The tectonic plates are shifting and this is a very early sign of it. It’s a sharp reminder here, to us, that your tax system and how it’s structured is an essential part of our national competitiveness,” Donohoe said.
The Netherlands said it would review its tax rates to ensure it remained attractive. “It is something we are thinking about with an eye to the future,” finance ministry spokesman Paul van der Zanden said.
The Organisation for Economic Cooperation and Development, in a June 24 internal email seen by Reuters, said a further cut in British corporation tax was unlikely but if it happened it would “really turn the UK into a tax haven type of economy.”
Other elements of Osborne’s plan to steer the economy through the upheaval caused by the Brexit vote included support for bank lending to ensure credit does not seize up, more efforts to direct investment to northern England and maintaining Britain’s fiscal credibility, the FT quoted him as saying.
Last week, Osborne said he would no longer target a budget surplus in 2020 because of the expected hit to the economy from the referendum result.
Corporation tax accounts for about 7 percent of British tax revenues.