U.K.'s Osborne Promises Corporate Tax Cut to Lure Investment

The Chancellor of the Exchequer says he will bring business tax rate down to less than 15%.
By Lisa Botter ,

The U.K. government will lower its corporate tax rate in a bid to attract business to a post-Brexit Britain.

The country's finance minister Chancellor of the Exchequer George Osborne yesterday said the rate would be cut to less than 15%, close to that of Ireland. The current corporate tax rate is 20%, it is scheduled to fall to 19% in April and to 17% in 2020.

The chancellor did not give a timeline for the cut, but it will likely appear in the so-called autumn statement - the government's fall budget.

Possible lack of access to an open market in Europe could put businesses off from investing, however a tax rate of 15% would be one of the lowest in Europe.

Osborne told the Financial Times that he wanted to build a "super competitive" post-Brexit economy with low business tax rates and a global focus.

However, the Organization for Economic Co-operation and Development has said that the U.K. is unlikely to turn itself into a tax haven.

In an internal memo seen by Reuters, OECD's head of tax, Pascal Saint-Amans, wrote, "The negative impact of the Brexit on U.K. competitiveness may push the UK to be even more aggressive in its tax offer."

He added, "A further step in that direction would really turn the UK into a tax haven type of economy," but there were practical and domestic barriers to do this.

The memo was dated June 24, prior to Osborne's announcement.

Beside lowering taxes for businesses the chancellor said he wants to focus on attracting further investment from China, ensure support for bank lending, invest in the north of England and maintain the U.K.'s fiscal "credibility."

The announcement was an about-face for Osborne, who maintained throughout the campaign that a vote to leave the European Union would mean an increase in taxes. The week prior to the referendum he said that taxes would need to rise to fill a £30 billion ($40 billion)  hole in public finances due to the economic shock of an exit.

The Bank of England tomorrow will release  its twice-yearly Financial Stability Report, which may include further measures to ensure bank liquidity. The central bank has already announced that it has made £250 billion available to banks and will continue with weekly liquidity auctions until the end of September.

The FTSE 100 in London today edged higher. It was recently at 6,583.72, up 0.08%.

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