Former Chancellor Lord Lawson has suggested that the UK could adopt a ‘Trump-style’ border tax to replace corporation tax, which would help to offset the impact of Brexit.
Speaking to Sky News this week, Lord Lawson praised the idea of a border tax, which President Trump maintains will pay for his famed wall with Mexico, and said that the UK should consider adopting something similar.
His comments came as Republicans are urging the President to adopt their proposals for what they term a ‘destination-based cash-flow tax’, which would amount to the most radical reform of business tax in almost a century.
The new taxation system would reverse the current system where businesses are taxed on the basis of where goods are produced and would instead tax them on where they are sold. There would also be a ‘border adjustment’ in which all imports would have to pay a ‘border tax’.
Interestingly, although the tax is likely to be implemented first in the US, the idea was dreamed up by a British academic at the turn of the millennium. Professor Michael Devereux suggested a tax that would help to cut down on tax avoidance by multinationals, which often move tax profits around the world towards low tax jurisdictions such as Luxembourg.
As Professor Devereux commented, if the tax rate on production was set at zero, manufacturers would be more likely to relocate here, which would be a huge boost to the UK economy, which could in turn help to offset the disadvantages of leaving the EU.
Lord Lawson, who abolished several taxes while he was Chancellor, agrees with this idea, saying that corporation tax is “past its sell-by date” and pointed out that there is no reason for the US to lead the way in the change when we could easily make it happen in the UK.
