Monday, July 4, 2016

Facing Brexit, London tax offensive to retain businesses – Les Echos

The anxiety that wins the business after the referendum on Europe urges the British government to act quickly to reassure. Without waiting for the election of a new leader of the Conservative Party to succeed David Cameron, the Minister of Finance announced a reduction in corporation tax. The rate now 20%, is already one of the lowest in the G20 countries. The Conservative government committed to reduce it to 17% by 2020. The prospect of Brexit pushes him to go further: it will fall below 15%, said George Osborne in the “Financial Times” <. / p>

Ten days after the election, the alarm is sounded. The City feared not being able to sell its financial services as easily on the continent, investments are postponed or canceled and a large group, the telecom operator Vodafone, has even threatened to move its headquarters.

George Osborne timetable remains unclear – no date was given for the reduction of impôt- but the message is clear: despite the uncertainty caused by the referendum result, the UK remains “open to business” , assured the minister, who also announced initiatives to attract more Chinese investment in the UK. “George Osborne wants to avoid as much as possible a weakening economy by sending a strong signal to businesses concerned” says Angus Armstrong, economist at think tank NIESR. The minister hopes in particular avoid relocations in Ireland, where the rate of corporation tax is 12.5%, and where many multinational companies such as Google have already established their European headquarters. “Ireland is seen as the most immediate threat in the current context” says Iain Begg of the London School of Economics.

” a vain and costly measure “

In announcing this measure, the Minister takes risks. First, it will offset the shortfall in public finances, valued at £ 4 billion a year. Although the government has abandoned its goal of balancing the budget by 2020, “can not depart from the budgetary rigor image on which it has built its success” , says Angus Armstrong. It will therefore ultimately reduce spending or increase other taxes.

This announcement is far from unanimous in Britain, where, as in France, the debate on tax optimization for multinational rages. Labour has criticized “a vain and costly measure” and denounced the government’s willingness to “turn the country into a giant tax haven” . “One can question the real impact of such a measure on larger companies because the corporate tax is already significantly lower than in the US, Germany or France” , analysis Helen Miller of the Institute for Fiscal Studies. As for small businesses, they are at least as sensitive to other taxes at the corporate tax, says this expert.


London also risks upsetting other European countries even before they have started the delicate negotiations for the release of the Union. “The twenty-seven will likely see this tax measure as hostile” , says Angus Armstrong. The Economy Minister Emmanuel Macron, showed his irritation Monday declaring that France expected London “ads on the consequences they intend to take the vote of the British people” not “a drop in tax”

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