BRITAIN will soon boast the lowest corporation tax rate of any major economy, after chancellor George Osborne revealed plans to slash the rate from 20% to less than 15%.
In an interview with the Financial Times, the chancellor said the cuts were part of a plan to galvanise the economy and woo businesses that may be unsure of their British allegiances following Brexit.
‘Super competitive economy’
The move would see Britain possess a corporation tax rate just 2.5% higher than Ireland’s, where a number of multinational corporations, including Facebook and Google, base their European operations.
In his first interview since 52% of the referendum voted to leave the EU, Osborne stated that he wanted to create a “super competitive economy” through low taxes and by attracting further global investment, particularly from China.
“We must focus on the horizon and the journey ahead and make the most of the hand we’ve been dealt,” said Osborne, whose new five-point plan to stimulate the economy includes furthering Chinese investment; guaranteeing support for bank lending; an increase in efforts to invest in the Northern powerhouse; and maintaining the UK’s fiscal credibility.
Osborne also urged the Bank of England to use its powers to avoid “a contraction of credit in the economy”.
In the last Budget, Osborne announced that corporation tax would be reduced to 17% by 2020, but the plans to reduce the tax even further has prompted worrying calls from the OECD.
UK a tax haven?
“The negative impact of the Brexit on UK competitiveness may push the UK to be even more aggressive in its tax offer,” said Pascal Saint-Amans, the OECD’s head of tax in an internal memo that was brought to light by Reuters.
“A further step in that direction would really turn the UK into a tax haven type of economy,” he added.
In January, French MEP Eva Joly told BBC Radio 4’s Today programme that the UK is “preparing itself to become a tax haven” for multinationals, in a reaction to Google’s £130m agreement with HMRC over unpaid back taxes.