George Osborne is planning to slash corporation tax to below 15 per cent in a bid to create a "super-competitive economy".
The cuts are part of the chancellor's plan to attract businesses discouraged from investing in Britain following Brexit. In an interview with the Financial Times, Osborne said he wants Britain to boast the lowest corporation tax rate of any major economy, cutting the rate to 15 per cent down from 20 per cent now. Ireland is among countries with the lowest corporation tax rates which stands at 12.5 per cent currently.
Osborne said Britain should “get on with it” to prove to investors that the country was still “open for business”.
The chancellor, who ruled himself out of the race to replace David Cameron last week, said that Britain is facing a “very challenging time” but it should focus on the "journey ahead and make the most of the hand we’ve been dealt”.
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He also called on the Bank of England to help avoid “a contraction of credit in the economy”, a scenario Britain faced during the financial crisis in 2008.
In March's Budget, the chancellor said corporation tax would fall to 17 per cent by 2020. At the time, CBI director general hailed the announcement as a "strong signal that the UK is open for global business investment".
Meanwhile OECD's head of tax Pascal Saint-Amans, said in an internal memo seen by Reuters, that the UK's vote to leave the European Union will force Britain to re-think its tax offer.
Saint-Amans said: "The negative impact of the Brexit on UK competitiveness may push the UK to be even more aggressive in its tax offer.
"A further step in that direction would really turn the UK into a tax haven type of economy," he said, adding that there were practical and domestic political barriers to doing this.
Saint-Amans went on to warn that the cut to tax rates might not be feasible for the UK thanks to the pressure on public finances "which may only increase with the negative impact of the Brexit on UK growth".
Taxpayers' Alliance called on Osborne to cut the rate to 10 per cent as soon as possible.
Jonathan Isaby, chief executive of the TaxPayers' Alliance, said: "The chancellor is absolutely right to be considering a big cut to Corporation Tax, as it would show that the UK is ready to seize new opportunities in the global economy.
"But Osborne must be bold and cut the rate to 10 per cent as soon as possible to really demonstrate that we are open for business, with competitive conditions to match our talented workforce. It's crucial that our politicians have a positive vision for British taxpayers outside the EU, and meaningful tax cuts to boost growth and prosperity are an excellent first step."