France warns Britain tax cuts threaten financial passport talks

By: | Published: July 11, 2016 6:09 PM

His British counterpart George Osborne announced plans last week to cut corporation tax to less than 15 percent in an attempt to cushion the shock of the country's decision to leave the European Union, raising the prospect of competitive tax cuts across the bloc.

spain-reu-L“Whether you’re in the union or you’re out, we should all adopt a friendly attitude,” Sapin said at a monthly news conference when asked about Osborne’s plans. (Reuters)

French Finance Minister Michel Sapin warned Britain on Monday that unfriendly measures to cut corporate tax would hurt its negotiating position in future talks to leave the European Union and be of no use to financial firms cut off from the bloc.

His British counterpart George Osborne announced plans last week to cut corporation tax to less than 15 percent in an attempt to cushion the shock of the country’s decision to leave the European Union, raising the prospect of competitive tax cuts across the bloc.

“Whether you’re in the union or you’re out, we should all adopt a friendly attitude,” Sapin said at a monthly news conference when asked about Osborne’s plans.

He said he agreed with German Finance Minister Wolfgang Schaeuble who said European countries should not engage in a race to the bottom by slashing taxes.

“I’m not even sure it would be a good thing for Britain to respond to the difficult spot they’re in in terms of financial credibility and attractiveness with tax measures,” he said.

“Even with (taxes) at 15 percent, there won’t be any financial passport for big financial companies. Even less so if they react like that,” he added.
The main concern for investment firms based in Britain is whether they will ultimately retain their “financial passport”, or the ability to sell their services to clients in the EU after the terms of Britain’s split from the bloc are made clear.

“It’s not a good way to start what is not yet a negotiation,” Sapin said.

The minister, a close ally of President Francois Hollande, also said Britain should not procrastinate in triggering article 50 of the EU’s Lisbon treaty to begin the formal process of leaving the bloc.

“A decision was taken by the British people. A sovereign, respectable and respected one. We respect it, it should also be respected by British authorities,” he added.

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