Britain will not succeed if it tries to attract businesses by undercutting its EU neighbours on corporate tax after Brexit, German Finance Minister Wolfgang Schäuble said on Wednesday.
“If a big country thinks that it can have the advantages of a small country, things will go wrong,” Schäuble told a G20 conference in Wiesbaden.
“Great Britain can't be compared with the Cayman Islands. That would be an insult to Great Britain.”
British finance minister Philip Hammond said in a German newspaper interview earlier this month that the island nation would be forced to “change our economic model” to remain competitive if it does not get the concessions it wants on access to the European single market.
Prime Minister Theresa May is expected to formally notify Brussels authorities of her country's intention to quit the 28-member bloc by the end of March, following a hard-fought exit vote last June.
London is keen to obtain concessions from the remaining EU members to allow its companies, including manufacturers and financial services providers, continued barrier-free access to the single market.
Hammond said he wanted Britain to remain a “recognizably European-style economy with European-style taxation systems, European-style regulation systems” after Brexit.
However, London would have to change course “if we are forced”, in order to “regain competitiveness”.
While May insists that the UK must also be allowed to control immigration from the continent onto its shores, EU leaders including German Chancellor Angela Merkel say the single market's “four freedoms” – of labour, capital, goods, and services – are indivisible.
“The rest of the world won't allow” tax havens to benefit at the expense of other countries, Schäuble insisted Wednesday.