On Tuesday, the British Prime Minister, Theresa May, will make her first strategic speech on her country leaving the EU. This will follow the threat made by the British Chancellor of the Exchequer, Philip Hammond, to the EU on Sunday 15 January, to transform the United Kingdom into a tax haven if the EU 27 did not meet London’s demands.
In an interview to the German newspaper, Welt am Sonntag, Hammond warned his European counterparts that although he preferred to keep his country in a European system on tax and regulation, the British public would not simply lie back and that they would have to change model and get back to a new level of competitiveness if the EU 27 refused the country access to the European single market under the conditions demanded by the United Kingdom.
As early as last June, an internal note from the OECD, drafted by Pascal Saint-Amans, expressed concern about the negative impact of Brexit on British competitiveness and which could push the country towards a yet more aggressive tax policy. Pascal Saint-Amans added that, “another step in this direction really would transform the United Kingdom into a kind of tax haven economy”. Mr Pascal Saint-Amans heads the OECE action plan against aggressive fiscal tax optimisation by corporations.
According to several different sources, in the work groups on tax, the EU28 never discussed the possibility that the United Kingdom would become a tax haven on the doorstep of the EU. Nonetheless, the EU will one day become a third country and leave the EU. This means that due to its strong economic ties with the EU, it could become subject to a European examination in the future updates in the European list of tax havens. As highlighted at the Council, the United Kingdom remains a member of the OECD and is involved the the implementation of the BEPS. It will also be necessary to see what strategy it would choose to make its taxation policy more attractive. Lowering its corporate tax rates will not be enough to make it into a tax haven in light of EU criteria. Moreover, certain European rules negotiated within the directive tackling tax evasion includes safeguards to protect European tax bands from unbridled tax competition in third countries.
According to the Sunday Times, Ms May might argue for a “hard Brexit” on Tuesday and set out an ultimatum to her partners. The United Kingdom will effectively leave the single market as well as the customs union if London is not given the agreement it wants and will seek to build “a world class Great Britain” that is capable of signing free trade agreements on its own. Ms May would also like to conclude an agreement with the EU that opens up the single market to certain vital economic sectors such as, automobiles, the pharmaceutical industry and finance. Border control and a rejection of free movement, however, will remain a priority for the British government.
As reported in the Guardian, the Commission’s negotiator in charge of Brexit, Michel Barnier, explained last Thursday to the presidents of the Parliamentary committees of the European Parliament that it was also in the interest of the EU to reach an agreement with United Kingdom in order to guarantee financial stability. According to the British newspaper, Michel Barnier, referred to an agreement that would allow the EU27 to continue to benefit from privileged access to the City of London. Mr Barnier’s services, however, last week denied that the ideas reported were exactly those that Mr Barnier had put forward to MEPs.
In a hard-hitting interview made to several different media outlets on Sunday 15 January, the US president elect, Donald Trump, claimed that Brexit was a good thing and that it would succeed (see other article). The US president elect will be inaugurated on Friday 20 January and said that he was willing to negotiate a free trade agreement with the United Kingdom, as soon as possible. (Original version in French by Solenn Paulic & Élodie Lamer)