A New Tax Haven in the Heart of Europe ?
Who would have believed only a few months ago that the UK would be looking seriously to become a new tax haven. And yet, the Chancellor P. Hammond has clearly threaten the EU with aggressive tax changes after the Brexit. He primarily focused on a substantial reduction of corporate tax. The Chancellor explained that in the event of failure of negotiations with the EU, his country would abandon " the European-style taxation and regulation systems ". Let us recall that today, the UK at 20% has the lowest corporation tax rates in the G7 group of major economies (Fig.Peterson Foundation). It has to be compared with the corporation tax rates of the Eurozone's 2 largest economies, France and Germany at 34% and 30% respectively. After the Brexit the UK's corporation tax would be set to come down to 15% or even to 10%! And there is no question that this aggressive strategy would trigger an immediate reaction from other tax havens and fuel a race to the bottom in terms of corporate tax. But above all, the realization of such a risky project would be a source of enormous trade tensions with the EU and the US. The British PM T.May has recently confirmed that it would be better to have no agreement at all than a bad agreement with the EU. And under pressure from a few conservative party hardliners she made it clear that she would be ready to use the fiscal weapon and create a post-Brexit tax haven. However, her position " have its cake and eat it too " seems not to be very realistic. This is tantamount to blackmail which is unacceptable. Especially when one speaks of the world's oldest parliamentary democracy.