Ahead of a key speech by Prime Minister Teresa May tomorrow, in which she will indicate how the UK intends to approach negotiations to leave the EU, the Chancellor’s suggestion of a possible cut in the corporation tax rate if there is a ‘hard’ Brexit has attracted strong criticism
In an interview with a German newspaper at the weekend, Philip Hammond said that if the UK was not given good access to the single market after Brexit, then Britain would consider abandoning European-style taxation and regulation systems, and ‘become something different’.
Hammond said: ‘We could be forced to change our economic model, and we will have to change our model to regain competitiveness. And you can be sure we will do whatever we have to do.
‘The British people are not going to lie down and say “too bad, we’ve been wounded”. We will change our model and we will come back, and we will be competitively engaged.’
In his first Autumn Statement at the end of last year, Hammond indicated he intended to keep to the plan of reducing the corporate tax rate to 17% by 2020. However, his predecessor George Osborne indicated the potential for a cut to 15% to ensure the UK remains competitive post an EU exit
Lodewijk Asscher, deputy prime minister of the Netherlands, has responded to Hammond’s comments by writing a letter to other socialist leaders across Europe, warning that the UK could become a tax haven if Hammond slashes the corporate tax rate.
Asscher said his country will block any post-Brexit EU trade deal with the UK unless it can agree on ‘firmly tackling’ tax avoidance, and warned of what he called a ‘race to the bottom’ on taxation.
