Germany warns Theresa May she won't be taken seriously if she turns UK into a tax haven

‘There cannot be any cherry picking by Britain in Brexit negotiations,’ says Angela Merkel

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Germany’s finance minister has warned Theresa May she will not be taken seriously by world leaders if she breaks a G20 agreement by slashing taxes to attract business after Brexit.

The Prime Minister has made clear she is ready to walk away from negotiations if the European Union only offers the UK a “punitive” trade deal.

Setting out her strategy on Tuesday, she warned that Britain would respond to any attempted punishment for Brexit by changing the basis of its economic model and reducing corporate taxes to attract investment.

But Wolfgang Schäuble said Mrs May’s claim that the country will emerge from Brexit as a “truly global Britain” would be undermined if she followed through on her warning.

She would be breaking an agreement reached by world leaders at 2015’s G20 summit in Antalya, Turkey, not to use corporate taxes to compete with other countries, he said.

Addressing a panel at the World Economic Forum in Davos, Switzerland, Mr Schäuble said: “The UK has always agreed and the G20 summit in Antalya said we will not use taxation (of) companies as a matter of instrument for competition, that has been agreed.

“And if we want to be taken serious we have to stick to what we have agreed.”

He went on: “I got Prime Minister May saying the UK will be a truly global economy.

“That has been agreed not in the EU, it has been agreed in the global forum of the G20 in Antalya, and therefore a truly global economy has to stick to what has been agreed globally, otherwise there will be a contradiction.

“And you can always count on the UK.”

Earlier German Chancellor Angela Merkel welcomed the fact that London had accepted that free movement of EU citizens was not something it could opt out of without losing other EU rights.

“There cannot be any cherry picking by Britain in Brexit negotiations,” she told an economic conference, adding that access to the bloc’s single market was ultimately linked to accepting the EU’s four freedoms – of movement of goods, capital, people and services.

Speaking during a joint news conference with Italian Prime Minister Paolo Gentiloni, Ms Merkel said: “The speech made by British Prime Minister Theresa May has given us a clear impression of how Great Britain wants to proceed.

“The main thing is that Europe does not let itself be divided and we will make sure of that via very intensive dialogue.”

Mr Gentiloni said the EU was “ready to discuss the issue with the correct approach, which is in solidarity and friendship with the UK”.

A spokesman for the German finance ministry said London’s vision for implementing Brexit could prove to be “pretty complicated” given that Britain would have no “EU passport” to conduct financial transactions once it left the bloc.

Swedish Prime Minister Stefan Lofven said he feared the two-year negotiation period, which will begin when Britain launches Article 50 of the EU’s Lisbon Treaty, may not be enough.

“Everybody needs to think through the timetable for these negotiations because in practice we have actually not more than perhaps one-and-a-half years, perhaps a little bit more,” he told reporters in Davos.

“Autumn 2018, that is a very, very short time for these complex negotiations, so I think that the UK ... is a bit optimistic (on the) timetable.”

While European Commission President Jean-Claude Juncker said EU negotiators were “not in a hostile mood” toward Britain, Slovakia’s Prime Minister said the EU had to ensure London did not win a deal that would be to the detriment of the remaining 27 members.

“I am convinced that in no case will a future agreement be more favourable for Great Britain than current membership in the EU,” Robert Fico told a news conference.

“Negotiations over Brexit will be very tough and painful and it would be wrong if (remaining EU members) emerged weaker and Britain stronger.”

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