Talk about tax competition is fast becoming a key part of the post-Brexit conversation in Europe and in the UK. This is because tax rates are an easy, high-yield mechanism to attract, or retain entities whose business models are positively disposed towards downward movements in corporate tax rates.
France, a most vocal opponent of tax rate arbitrage for investment attrition,has been quick to populate national blacklists of jurisdictions with tax rates deemed ‘harmful’. This however, has not stopped the French Prime Minister from making encouraging ‘noises’about re-aligning French tax rares to entice businesses away from the UK, post-Brexit. Moreover, both Portuguese and Spanish leaders have made similar overtures about the elasticity of their tax rates in order to sure up their flailing economies.
Meanwhile back in the UK, while it is not certain that the new Chancellor will press the ‘reset’ button in the Autumn; and what such a ‘reset’ might look like, a reduction in corporate tax rates was certainly on the cards for his predecessor.
Of course there is a problem.
The BEPS Tax Avoidance agenda tends towards downward movements in tax rates as inimical to good tax governance. Indeed, leading BEPS proponent, Pascal Saint-Amans, has warned that further moves by the UK to reduce its corporate tax rate “would really turn the UK into a tax haven type of economy”.
If the correlation between tax havens and corporate tax rates sounds familiar it is because it was one of the failed limbs of the the OECD first iteration of global tax reform.
That said, as the saying goes, if at first you don’t succeed try, try and try again.