EU countries are creating special tax regimes to attract wealthy financiers and property tycoons away from Britain post-Brexit, a new report finds . The Green report, Competing for the Rich, identifies Brexit as one of the factors pushing a race to the bottom on personal tax rates.
The report cites France as an example of a country deliberately seeking to increase the attractiveness of Paris as an alternative to London for bankers and financiers by removing wealth taxes, and Italy which started a scheme following the Brexit vote and where UK residents make up a third of new users. Brexit is also suggested as having prompted Cyprus to create ‘arguably the most beneficial scheme for the very rich and mobile with high capital incomes – with virtually no tax’. Such moves are likely to accelerate the race to the bottom as the UK makes retaliatory moves to entice the wealthy to stay in the UK or be lured from other European countries.
The report, which comes exactly three years since the Panama Papers leaks, notes that personal income tax is the largest source of revenue within the EU, raising 22% of the total tax revenue – compared to 7% for corporate income tax. However, lower tax rates, special exemptions and ‘golden visas’ for the highly skilled, rich and mobile have mushroomed within the EU in recent years, with the UK and the Netherlands being identified as offering the biggest such schemes. The report suggests 160,000 people are currently benefitting from special schemes within the EU to avoid paying their fair share of personal income tax at home.
Molly Scott Cato, a Green MEP and member of the parliamentary committee on financial crimes, tax evasion and tax avoidance, said:
“Personal income tax is the largest source of EU revenue for funding our vital public services and important infrastructure. Schemes which allow the wealthy to dodge paying their fair share of tax means these vital services are starved of much-needed cash and exacerbate levels of inequality. This report reveals that the social contract in the EU is broken which is undermining faith in democratic politics. European citizens expect the EU to take the lead in putting a stop to tax injustice.”
“It is clear that Brexit is fuelling the race to the bottom on tax rates in the UK. If we do leave the EU, countries in the EU27 will be encouraged to entice financiers and other wealthy elites away from the UK while our country will try to stem this through tax regimes which further undercut EU rates.”
“Brexit stands in the way of putting a stop to tax injustice. The way to avoid this is for the UK to remain in the EU and to work collectively and cooperatively with other European countries to end unfair tax competition across the EU.”