Donald Trump’s tax code changes could give unexpected boost to the City
Donald Trump’s proposed changes to the US tax code could result in London regaining its attractiveness for those working in the financial services, according to one of the former architects of Brexit.
The Tax Reform Bill – although being criticised as a boon to the rich – could force the top rate tax bill to 56 per cent, once additional levies such as the Affordable Care Act and State and Local Tax (Salt) are taken into consideration.
There would then be a “whacking great difference” between the US and the UK’s 45 per cent top rate, says Matthew Elliott, former chief executive of Vote Leave and senior political adviser to Shore Capital. “It’s another reason why London will continue to keep the top spot,” he added.
The changes to the US tax code come at a “helpful time”, Elliott said, pointing to the final breakthrough in Brexit negotiations.
“The chance of us leaving the EU without a deal is much less than it was perceived to be a year ago, so there is greater confidence among businesses that there will be a deal. With Wall Street looking not-so-good for the higher rate tax payer, that is doubly good news for the City.”
Elliott dismissed the suggestion that EU capitals such as Frankfurt, Dublin and Paris could still stand to benefit from jobs moving in the wake of Brexit, pointing to an increase in federalist talk. German MEP Martin Shultz last week set out his vision for an obligatory “United States of Europe”, while Jean-Claude Juncker called for a “more united Europe” – including making the euro the sole EU currency – back in September.
Elliott added: “No one has put forward a financial centre that could really match London… so the only realistic thing would be to drive [businesses] out of the City – but it wouldn’t be a case of decamping to Frankfurt, Paris or Dublin. It would be elsewhere.
“What’s happening in the US makes Wall Street less desirable, so that leaves a big question-mark. And for the EU, it’s useful having the world’s financial centre on your doorstep – you won’t want that to go elsewhere.”