The senior Labour MP spoke out after George Osborne signalled that he wants to cut corporation tax to below 15 per cent as part of a plan to give Britain a post-Brexit boost.
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Responding to the interview, Jonathan Isaby, chief executive of the low tax campaign group the TaxPayers’ Alliance, said the rate cut would show “the United Kingdom is ready to seize new opportunities in the global economy”. “How we respond will determine the impact on jobs and growth”, Osborne said.
The chancellor did not backtrack on his warning that a Brexit vote would cause a recession.
He said last week the government must maintain its “fiscal credibility” by pressing ahead with efforts to close the U.K.’s budget deficit but conceded his goal of eliminating the shortfall entirely by 2020 would have to be abandoned.
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 UK is already activating one of the weapons in this negotiation, which is tax dumping, tax competition”.
According to Pascal Saint-Amans, the head of tax at the OECD, the United Kingdom using the freedom from European Union to slash corporate tax will have unpleasant political consequences, reports The News.
It is likely that the government will raise borrowing so it can avoid further cuts in spending or raising taxes.
Earlier Mr. Osborne had said that the country’s budget deficit presents a risk to Britain’s future, because investors might decide to stop financing the government just like in case of Greece.
He talked about a five point action plan to shape Britain’s economic destiny after Brexit to build a “super-competitive economy” of low business taxes.
Economy Minister Simon Hamilton claimed recently that a cut in the rate of Northern Ireland’s corporation tax to 12.5% from 2018 would be “a powerful lever that can stimulate economic prosperity”. Shadow Chancellor John McDonnell described the plan as “counter-productive”.
“A further step in that direction would really turn the United Kingdom into a tax haven type of economy”, said Pascal Saint-Amans, head of the Organisation for Economic Co-operation and Development (OECD), in a memo dated 24 June reported by Reuters.
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He told BBC Radio 4’s Today programme, “I hope we will be able to get to a position where we are able to say to those European Union nationals who live in the United Kingdom, and to those Brits who live in European Union countries, everything’s fine, you can stay as you were”.
