by Robert Lee, Tax-News.com, London
19 April 2016
The amount of money the UK’s public services would lose if the country left the European Union (EU) is “the equivalent of eight pence on the basic rate of income tax,” Chancellor George Osborne has warned.
In a speech to mark the launch of new Treasury analysis of the impact of a so-called Brexit, Osborne stressed that “higher taxes and a smaller economy [are] not a price worth paying.”
The Treasury assessed continued UK membership of the EU against three existing alternative models: membership of the European Economic Area (EEA); a negotiated bilateral agreement; or World Trade Organisation (WTO) membership without any form of specific agreement with the EU.
According to the Treasury, if the UK leaves the EU following its June 23 membership referendum, there would be a long-term reduction in gross domestic product (GDP) of around four percent every year. Osborne cautioned that “this long-term reduction in GDP will hit our tax receipts as people and businesses earn less.”
Osborne explained that the Treasury had calculated that “the most likely bill our public services would pay if we left the EU is GBP36bn (USD51.6bn). That’s the equivalent of eight pence on the basic rate of income tax.”
In addition, Osborne argued that the impact on tax receipts of joining the EEA in the EU’s stead “would be GBP20bn a year within 15 years’ time.” The Treasury further estimated that, were the UK to enter a negotiated bilateral agreement with the EU, the total reduction in tax receipts would reach GBP36bn a year, or GBP45bn a year in the case of WTO membership.
“Not a one-off hit, but an ongoing painful reduction as our country raises less money, and has less money to spend on public services,” the Chancellor said.