The Swedish Prime Minister Stefan Loefven has threatened to make the Brexit process “more difficult” unless the British government scrap planned corporation tax cuts which would see EU member states’ competitiveness eroded.
Mr Loefvan warned that any “aggressive” tax cuts will damage British relations with her European Union neighbours, the Telegraph has reported.
His warning follows an announcement by the Chancellor Phillip Hammond that he intends to “reset” British fiscal policy by unveiling measures in his upcoming Autumn Statement to cut tax rates while increasing borrowing to spend on infrastructure,
Mr Loefven told Bloomberg that the Brexit process “shouldn’t take longer than necessary,” but denied that Britain should be rushed into starting the process.
“If the UK wants some time to think about the situation, this will also give EU countries some time,” he said.
“On the other hand, you hear about plans in the UK to, for example, lower corporate taxes considerably. If they, during this time, begin that kind of race, that will of course make discussions more difficult.”
Mr Loefven added: “We will continue to invest, because that’s the future. Tax cuts are not the future. We need to continue to invest, and, for example, make sure our children get a good education.”
However, a spokesman for the Institute of Economic Affairs (IEA) told Breitbart London that it was “absurd” of European leaders to issue threats of this nature against the government.
“It is up to the British government whether corporation tax is cut, and it should now take that step given that such high rates of corporation tax discourage capital investment and therefore makes the UK less attractive as a location for real economic activity,” she said.
“The Brexit vote was a cry out for less interference in domestic policy. The leaders of Europe should take heed of this.”
Meanwhile Madsen Pirie, president of the Adam Smith Institute, has called on the govermnnet to seize the opportunities presented by Brexit, which he described as “a unique chance of the sort that occurs perhaps once in a generation”.
Those opportunities include the ability to radically rethink tax policy – which he said has previously evolved “from accidents and incidents rather than from design” – including the scrapping of corporation tax completely.
He said: “There is a false belief that this is paid by companies, but it is not. It is paid by the employees of companies, by their customers, and by their shareholders.”
Mr Pirie suggested that the tax could be reduced incrementally, to 12.5 percent, then 6.25 percent, and then zero.
Mr Hammond’s predecessor at the Treasury, George Osborne, unveiled plans to reduce corporation tax to below 15 percent before he was reshuffled out of the cabinet in July, although he did not give a timescale for the tax reduction.
Corporation tax currently stands at 20 percent in the UK, just two points below Sweden’s current rate of 22 percent.