Paul L. Caron

Tuesday, January 24, 2017

The U.K.'s Threat To Weaponize Tax Is No Bluff

Bloomberg View:  The U.K.'s Threat to Weaponize Tax Is No Bluff, by Mark Gilbert:

The U.K. government is threatening to give its post-Brexit economy a shot in the arm by reducing corporate taxes to become a sort of "Singapore-on-Thames," a tax haven on the perimeter of the European Union. EU officials are dismissive of the idea; but they may be whistling past a graveyard.

At a rate of 20 percent, the U.K. currently ranks in the 11th lowest tax bracket in the EU, level with Finland and Estonia, lower than France or Germany but higher than Ireland, Poland and the Czech Republic:


The tax threat hasn't gone down well on the Continent. Pascal Saint-Amans, the head of tax at the Organization for Economic Co-operation and Development, wrote a memo in June arguing that while becoming a "tax-haven type of economy" would be attractive for U.K. officials, "the mood of the people is certainly not about giving more benefits" to large companies. ...

(Whether or not a tax-slashing strategy would do Britain's economy much good is unclear. Here's a paper from the Australian Treasury last year arguing that lower levies work; here's another, from the National Bureau of Economic Research says that taxing companies less results in reduced employment and income.) ...

Britain's threat is all the more credible given global trends. Corporate taxes have been on a downward trend for years all around the world. The OECD average is down to less than 25 percent from almost 28 percent in 2006. Even in Germany, the tax rate has dropped by almost 10 percentage points in the past decade to its current level a shade below 30 percent, which in turn is below the nearly 40 percent rate faced by U.S. companies, and which President Donald Trump has said he plans to reduce. The U.K. may just be ahead of the curve.

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Nothing to worry 'bout, lads. Brexit will never happen and Trump is only running for entertainment/marketing.

Cheerio, Good-Bye, Toodle-oo, Hip Hip!

Posted by: Anon | Jan 27, 2017 3:48:27 PM

Good for them. I suspect Trump's gutsy approach is proving infectious.

Posted by: Michael W. Perry | Jan 24, 2017 2:58:44 PM

Eventually, corporate income tax rates will get to zero, as they should be. Let shareholders (owners) pay personal income taxes on their income from the corporation or on the capital gains when selling their interest in the corporation.

Posted by: Bob | Jan 24, 2017 7:16:35 AM