British Finance minister George Osborne said Monday he would seek to slash corporation tax over fears of a corporate exodus following the country's shock decision to leave the European Union. Chancellor of the Exchequer Osborne could extend planned cuts to Britain's levy on company profits to under 15 percent, the Treasury said Monday, confirming a weekend report in the Financial Times newspaper.
Last month's shocking Brexit vote triggered political turmoil and warnings that the country could be plunged into recession. Prior to the vote, tax rates on corporate profits were already set to be cut from 20 percent to 19 percent next year and to 17 percent in 2020. But the new target, which has no timetable, would give Britain the lowest rates of any major economy, and put it closer to the 12.5 percent rate in EU member Ireland. "We must focus on the horizon and the journey ahead and make the most of the hand we've been dealt," Osborne told the newspaper.
Scott Corfe, an analyst at the Centre for Economics and Business Research, said the cut would be a sensible move. "With signs that the economy is set to slow drastically, there is a strong case for fiscal stimulus and measures which assure companies that the UK is an attractive place to do business," he told AFP. "While a cut in corporation tax would cost the government money initially, over the medium-to-long term it would be a revenue raiser, given the increase in economic activity that it would stimulate."
Osborne has been steadily cutting corporation tax since 2010, when the rate stood at 28 percent. His plan to bring it down to below 15 percent received an angry retort from John McDonnell, finance spokesman for the main opposition Labour Party.
"Instead of turning the whole country into a giant tax haven and playground for the ultra-rich, the chancellor needs to get a grip on the real problems," he said. Osborne, along with outgoing Prime Minister David Cameron, had spearheaded the "Remain" campaign, which sensationally lost the June 23 referendum on Britain's membership European Union.
While Osborne wants to take an axe to corporation tax, the chancellor last week said taxes in general would have to rise. He also scrapped the Conservative government's promise for a budget surplus by 2020, sparking forecasts of more austerity pain.
Analysts were quick to point out that even without Brexit, Osborne was unlikely to have met the ambitious target. His own future as finance minister is also far from certain amid the race to find a new Tory leader and prime minister.
Interior minister and Conservative leadership frontrunner Theresa May on Sunday said she would honor the result of the referendum and has ruled out holding a general election before 2020. She is backed by Foreign Secretary Philip Hammond, who in The Telegraph newspaper Monday wrote that going forward Britain's central trade-off with the EU would be "access to the single market versus freedom of movement of people." He added, "Those who believe there is no need for such a trade-off have misunderstood something fundamental about the politics of the European Union."
