In an interview with the Financial Times, Chancellor George Osborne announced plans to cut Britain’s corporation tax to below 15%. The pledge comes as part of a five-point plan intended to show investors that Britain is still “open for business”.
Lowering corporation tax to 5% lower than its current 20% rate would give UK the lowest corporation tax of any major economy. It would also mean Britain would compete with Ireland’s 12.5% corporate tax rate.
The news follows Osborne’s announcement on Friday that the 2020 budget plan would not be realistic after the EU referendum result. The desertion of plans to return the government finances to surplus also meant goals to cut corporation tax to 17% by 2020 were abandoned.
No specific timeframe for the plan to cut corporation tax to below 15% were given, although Osborne commented that Britain should “get on with it” and “make the most of the hand we’ve been dealt”.
Worries over Britain becoming a corporate tax haven have been raised by shadow chancellor John McDonnell, who called the proposal “counter-productive”. McDonnell accused Osborne of “offering up Britain as a tax haven” with “panic tax cuts”.
There are also concerns that the cuts would begin a corporation tax competition, as McDonnell argued; “I don’t think it sends the right message to those countries that wish to establish a co-operative relationship with us in the future”.
The rest of the five-point plan includes support for bank lending, push for investment in China, focus on delivering the northern powerhouse and maintaining Britain’s fiscal credibility.
When announcing the plans Osborne said he wants to play a leading role in shaping the country’s economic future.
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