Osborne begins Brexit negotiations by tax dumping
George Osborne announced plans to reduce British corporate tax to encourage investment to under 15% from the current 20%.
That means the U.K will have the lowest corporation tax of any major economy. The first slash on corporate tax is expected in March, going to 17%, Osborne told the Financial Times on Monday.
The move was soon criticizing by the World Trade Organization chief, Pascal Lamy, as “tax dumping,” activated because investors are flocking out of the economy. The WTO chief noted that this was in effect the beginning of the Brexit negotiation, which starts on the wrong footing. “If you want a proper balanced win-win relationship in the future, starting with tax competition is not the right way psychologically to prepare this negotiation.”
The criticism was echoed by shadow chancellor John McDonnell, who said it was “counterproductive” for Osborne to offer Britain a “tax haven” to Europe, and the move was likely to hit citizens via rising income tax.
Osborne insists this is part of his plan for a super-competitive economy.
That move goes contrary to the Chancellor’s warning before the Brexit vote, who had warned of rising taxes to meet a 2020 fiscal objective to achieve a budgetary fiscal surplus. However, last week the British Chancellor officially abandoned plans for a budget surplus.
The positive case for Brexit
Meanwhile, Mr. Johnson has apparently abandoned the Tory leadership context to return to critical appraisal of governance, calling on the Remain side to stop their “contagious mourning” about Brexit and to trumpet its positive aspects.
In his Daily Telegraph column he says that “the stock market has not plunged,” “the FTSE is higher than when the vote took place,” and there is no emergency budget, “nor will there be.” He remains confident Britain will secure a zero-tariff free-trade deal with no strings attached, because Britain is vital to the EU as a trade partner.
The former Mayor of London and Leave champion offered no comment on the tumbling pound which, if it were to slide 2% further, Britain would no longer be the fifth biggest economy in the world. Also, Johnson did not say whether all three major credit rating agencies were part of the “collective mourning.” Osborne on the other hand did mention the economy was showing “clear signs” of shock following the Brexit vote and offered lower corporate tax as a response.
The director of the Institute for Fiscal Studies in London Paul Johnson predicts either full blown recession or extremely slow growth as a result of Brexit.