German minister: No Brexit race to bottom on business tax

BERLIN – Germany’s finance minister says he doesn’t expect a “race to the bottom” on business taxes in Europe after Britain announced plans to cut its corporation tax rate.

British Treasury chief George Osborne said Monday that he plans to cut the U.K. corporation tax to below 15 per cent to encourage investment and ease business concerns after voters chose in a June 23 referendum to leave the 28-nation European Union.

Some London-based businesses are considering leaving for other European cities — Paris, Berlin, Amsterdam — to benefit from the EU’s large common market.

German Finance Minister Wolfgang Schaeuble said Wednesday that Britain’s move would have little influence on German policy.

“We have no intention in Europe of starting a race to the bottom,” Schaeuble told reporters in Berlin. He added that “we are not against tax competition, but we favour public budgets in all member countries being fairly and appropriately financed.”

The prospect of an economic downturn in Britain and the risk of businesses moving away from London are raising concerns that Britain’s commercial real estate might drop in value.

On Wednesday, three more financial firms — for a total of six this week — suspended trading in their U.K. commercial real estate funds after investors rushed to sell out.

Henderson, Columbia Threadneedle and Canada Life said they had to suspend trading in the funds, which buy and own commercial property and sell shares to investors. When investors rush to sell their shares, that drains the funds dry, which then risk having to sell properties they own to pay investors back.

The jitters in the real estate market have pushed down the pound to a 31-year low of $1.2950.

Schaeuble stressed that it’s up to Britain to decide what future relationship it wants with the EU. Departing British Prime Minister David Cameron has left the decision to formally trigger EU exit talks to his successor, who will be elected by members of the governing Conservative Party in September.

Conservative lawmakers on Thursday will hold another vote to whittle down the three contending candidates remaining to two: Home Secretary Theresa May, Justice Minister Michael Gove and Energy Minister Andrea Leadsom.

A key question is whether Britain wants to remain part of the EU’s single market. Schaeuble underlined EU leaders’ insistence that any country wanting that access has to accept the free movement of European workers — a notion that is strongly opposed by those who wanted Britain to leave the EU.

“One thing is clear: belonging to the internal market of course means accepting the fundamental freedoms in Europe,” he said. “Switzerland had to take note painfully of that after a referendum.”

Swiss voters decided by a wafer-thin majority in 2014 to cap immigration for all foreigners, including EU citizens, which would violate EU-Switzerland treaties. Its government has been trying since to find a way to reconcile that result with its relations with the EU.

Switzerland, which is surrounded by the EU but not a member, was excluded after the referendum from a popular Europe-wide student exchange program.