Tue, Aug 01, 2017 - Page 10 News List

UK will not cut taxes below European average after Brexit, Hammond says

LOW-TAX CARD:The finance minister denied that London would resort to lower taxes to remain economically attractive after Britain leaves the EU

Reuters, LONDON

British Chancellor of the Exchequer Philip Hammond, right, meets staff as he tours the IBM office on the South Bank in London on Wednesday last week.

Photo: AP

The UK does not intend to lower taxes far below the European average to remain competitive after Brexit, but rather expects to keep a recognizably European economic and social model, British Chancellor of the Exchequer Philip Hammond said.

Hammond had suggested in January that Britain might have to change its economic model to remain competitive in the event that it left the EU without having secured an agreement on market access.

Hammond, who had campaigned for Britain to remain in the EU ahead of last year’s referendum, is seen as a proponent of a relatively “soft Brexit.”

In an interview with French newspaper Le Monde published over the weekend, Hammond was asked whether Britain would play the low-tax card to remain economically attractive after Brexit.

“It is often said that London would consider launching into unfair competition in terms of fiscal regulation. That is not our project or our vision for the future,” Hammond was quoted as saying in response.

“The amount of tax that we raise, measured as a percentage of GDP, is within the European average and I think we will remain at that level. Even after we have left the EU, the United Kingdom will keep a social, economic and cultural model that will be recognizably European,” he said.

The comments were markedly different from Hammond’s responses in his January interview with German newspaper Welt am Sonntag, which were seen as a thinly veiled threat to use corporate tax as a form of leverage in Brexit negotiations.

Asked directly whether Britain would lower corporate tax, Hammond had said that while he hoped Britain would remain a European-style economy with corresponding tax and regulation systems, it might have to change its model if it left the EU without agreement on market access.

In his Le Monde interview, Hammond was also asked to comment on the prospect of banks potentially moving part of their activities after Brexit from the City of London to EU cities such as Frankfurt, Paris or Dublin.

Hammond said it would be “very dangerous for Europe” to fragment the financial services market based in the City, which he described as an important component of the British and European economies.

“The big winner would not be Paris or Frankfurt, but New York. Let’s not have any illusions: The major American banks are not going to fragment their activities between different countries,” Hammond said.

“They will either keep working as they do today, or they will move their activities back to Wall Street, which is particularly attractive given that the US administration is in favor of deregulation and cutting taxes,” he said.

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