Hammond to scrap Osborne’s plan to slash corporation tax

UK chancellor of the exchequer Philip Hammond has indicated that he will scrap his predecessor George Osborne's plan to slash corporation tax to below 15 per cent, telling EU finance ministers that the former chancellor's policy amounted to "suggestions made in the last days of office."

The tax cut was mooted by Mr Osborne in July as the government was reeling from the impact of Britain’s vote to leave the EU. Mr Osborne, one of the major political casualties of Brexit, said at the time that the UK had to show that it was “open for business”.

Within days he would be out of office — sacked by new prime minister Theresa May.

Mr Hammond, speaking at a meeting in Bratislava on Saturday, told his EU counterparts that Mr Osborne's remarks should not be seen as being government policy, according to people present during the talks.

“Suggestions made in the last days of office are just suggestions,” he said.

The remarks, first reported by Bloomberg, mark a stepping back by Britain from a move that would have amounted to overt tax competition against Britain's EU partners.

The EU is waging a campaign against such beggar-thy-neighbour policies. Last month it order Ireland to claim €13bn in unpaid taxes from US technology giant Apple.

It is also pushing common rules for how multinational companies should determine where they pay their taxes, an agenda strongly supported by Paris and Berlin.

For Karel Lannoo, chief executive of the Centre for European Policy Studies in Brussels, Mr Hammond's remarks are "an olive branch."

Mr Osborne’s plan was “a bit of a panic reaction” which sent a message that “we don’t care and we’ll just go ahead with regulatory competition,” he said.

The UK government is already planning to gradually lower the corporation tax rate from 20 per cent to 17 per cent by 2020, and Mr Hammond told the EU meeting that he was sticking with that timetable.

Even that reduction would leave the UK with a tax rate much lower than the EU average of around 24 per cent.

The Treasury said: “The government is committed to a competitive tax regime and decisions on tax polices will be set out at future Autumn Statements and Budgets in the usual way?.”

The Bratislava meeting marked the first meeting of EU finance ministers since Mr Hammond was appointed chancellor in July. He is set to present his first budget statement on November 23rd.

Financial Times