Chancellor George Osborne has pledged to cut corporation tax from 20 per cent to less than 15 per cent to encourage businesses to continue investing in the UK after the vote to leave the EU.
Mr Osborne told the Financial Times that the UK was facing a “very challenging time”, but that “we must focus on the horizon and the journey ahead and make the most of the hand we’ve been dealt”.
The Chancellor added that Britain should “get on with it” to reassure investors that the UK is still “open for business”.
Research from rplan.co.uk found that investors were pulling out on shares in commercial properties after the vote for Brexit.
The tax cut is part of a five-point plan to make the UK a “super competitive economy” to attract investment after the Brexit result.
Other elements of the five-point plan are to provide support for bank lending, focus on investment from China, develop the ‘northern powerhouse’ and to maintain the UK’s fiscal credibility.
In March, Mr Osborne announced plans to cut corporation tax to 17 per cent by 2020. By cutting the rate to below 15 per cent, Britain would have one of the lowest rates of any major economy and be better able to compete with countries such as Ireland, where corporation tax is 12.5 per cent.
However, former World Trade Organisation chief Pascal Lamy told the BBC that starting with corporation tax was not the right way to start Brexit negotiations.
He said: “The UK is already activating one of the weapons in this negotiation, which is tax dumping, tax competition. I can understand why he [Mr Osborne] does that, because obviously investors are flowing out from the UK, and he wants to provide them with some sort of premium that would make them think twice before they leave the United Kingdom.
“He has to think about the impact of this on the Continent. This will be seen on the Continent as the start of the negotiation.
“And I’m quite convinced that, at the end of the day, if you want a proper balanced win-win relationship in the future, starting with tax competition is not the right way psychologically to prepare this negotiation.”