Government must be responsible – not rash – on tax policy decisions for Brexit to be successful

Fighting tax avoidance and evasion has been at the forefront of the EU’s agenda since I became an MEP in 2014. Revelations such as the SwissLeaks, LuxLeaks and Panama Papers have increased public awareness of the billions of pounds lost every year from national coffers to tax havens around the world, and prompted politicians right across Europe to think about how we can put an end to these practices.

The UK can currently drive change in international tax standards through our membership of the EU. Over the last few years, the EU has been among the first to implement new international standards, often going above and beyond the minimum standards agreed globally.  Forthcoming EU proposals will improve the situation further: a project to establish a single set of tax rules for EU countries will stop multinational firms artificially shifting their profits to low tax countries, while new rules elsewhere will force large cross-border companies to publish precisely where they make their profits and where they pay their tax.

However, Brexit puts all of this at risk. Theresa May’s high profile Brexit speech in January included threats to undercut our European and global partners and to turn the UK into a bargain basement tax haven through lower corporation tax and a withdrawal from international projects.  Such an approach, using tax as a political football and economic “silver bullet”, would not only damage and anger our allies, it would damage the UK too.

If the UK decides to undercut our neighbours on tax by making hasty tax decisions designed to win political favour, then we risk firing the starting gun on a European, or even a global, race to the bottom on tax – and significantly reducing our chances of getting a good post-Brexit deal as a result.  The UK abandoning its commitments to EU tax standards, or slashing its tax rates still further, would rightly be seen as an act of aggression.  Some other EU countries would be tempted to follow suit, and start weakening their own tax rules.  And all of them would harden their stance on other elements of the Brexit debate – be it on access for UK goods, rights for UK citizens, or any of the other hundreds of sensitive issues that need to be considered as part of the upcoming negotiations.

It is the British people who would pay the price of such an approach.  If the UK government slashes tax rates for big multinational firms in a desperate attempt to look “business-friendly”, then it will either have to find money from elsewhere – which means the burden falling on individuals and small businesses – or cut back spending on vital public services such as education, health and social care.  Neither of these are good outcomes for ordinary people or indeed the big businesses who employ those people.

There is another way.  Rather than issuing threats, the UK could start the Brexit negotiations with a promise: that we will respect the commitments to tax justice we made as an EU member, and that we will continue to work with our EU partners in pursuit of tax justice after we have left.  This would allay fears on the other side of the Channel and set the tone for a positive round of negotiations.

Globalisation has made shifting profits, goods and assets around the world easier than ever, and tackling tax avoidance and evasion can’t be achieved through isolationism and protectionism. With worrying noises coming from the USA right now, Britain’s exit from the EU places us at a crossroads when it comes to tax.  My view is clear: we should not join President Trump’s race to the bottom; we should join the EU’s race to the top.

Anneliese Dodds MEP

Anneliese Dodds MEP

Anneliese Dodds is the Labour MEP for the South East of England and is a full member of the Economic and Monetary Affairs Committee and Panama Papers Committee in the European Parliament. Before becoming an MEP Anneliese was a Senior Lecturer in Public Policy at Aston University.
Anneliese Dodds MEP

@AnnelieseDodds

Labour and Cooperative MP for Oxford East. Rose Hill resident. Mum to two little gremlins. Curry fan. Views my own.
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Anneliese Dodds MEP

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