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The proposed corporation tax cut from 35% to 15% announced by Donald Trump, is likely to encourage a race to the bottom on tax rates, economist and Green MEP Molly Scott Cato has warned. She says a Conservative government will be encouraged to follow suit post-Brexit and create ‘tax haven Britain’:
“This is a highly aggressive move by Trump, but also a canny one. Swinging a sharp axe to corporation tax will encourage US corporations to bring home profits that have been held offshore, which will increase tax yields in the short run. This will provide a boost to infrastructure investment, paying the bill for the wall he wants to build between the US and Mexico for example. However, in the long term this drastic cut, which will lead to an estimated $2.2 trillion loss in revenue, will leave the country unable to provide even the meagre services to its citizens that it currently does.
“Such a move by Trump will further motivate the Conservatives to create tax haven Britain post-Brexit and encourage a global race to the bottom on tax rates. Already we have seen proposals from the Tories to reduce corporation tax rates to as low as 12.5% [3].
“In the past, the US has unilaterally created new standards that then became international positions, such as obliging the automatic exchange of tax information. Today’s move shows the US is now unilaterally moving to reduce international standards and encourage a race to the bottom. This is not making America great again, it moves the country towards being a less civilized and more unequal society, which will have negative repercussions in the UK and beyond.”