The European Union's top economic official on Tuesday criticised a British proposal to slash corporate tax to less than 15 percent following the nation's vote to quit the bloc. Britain's finance minister George Osborne said at the weekend he would seek to reduce corporation tax to under 15 percent over fears of a corporate exodus following the June 23 referendum to leave the EU.
The bloc gave a frosty reception to the plan, however, saying it would raise the threat of a competitive series of corporate tax cuts as countries try to lure firms to their shores. "Going to 15 percent does not seem to me to be a good initiative," EU economic affairs commissioner Pierre Moscovici told French radio station Radio Classique.
"We should not enter into exacerbated fiscal competition between ourselves, or fiscal dumping," Moscovici said in the first public reaction by the EU to Osborne's proposal. The British chancellor of the exchequer revealed his plan in an interview with the Financial Times published on Sunday evening. The Treasury confirmed the comments to AFP.
Prior to the Brexit vote, British tax rates on corporate profits were already set to be cut from 20 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 Financial Times.
But Moscovici said that Osborne's initiative "also means an absolutely considerable loss for the British treasury in a situation in which deficits in Britain are already much too high". Those deficits would now "attract more attention from markets and rating agencies" because Britain would no longer be operating in the EU framework, he said.
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