The Brexit “Leave” decision is tying the hands of the British government and Prime Minister Theresa May. The worry is that the Brexit decision will induce many corporations to move their headquarters out of Britain.

Shortly after the June vote to leave the European Union, former PM David Cameron floated the idea of cutting corporate tax to 15% from 20%, as a way to help ease the worry in U.K. boardrooms The current U.K. Prime Minister Theresa May is also promising to sharply lower the corporate-tax rate to, in effect, counter the natural incentive for international investors to choose new head office locations. The low corporate tax scenario is intended to give British executives a reason to re-think any such action.

In most cases, the thinking behind a corporate tax cut is that it will attract international investors, high value added jobs and improve the productivity of the economy. In Britain’s case, the real reason is defensive, to counteract the negative effect of the Brexit Leave vote.

President-Elect Trump also indicated on the campaign trail that he would cut the top tax rate for all businesses to 15 percent from the present 35 percent if he became president. Trump also said he would eliminate the “carried interest” loophole that lets private equity and hedge fund managers pay a lower tax rate than most other people. Trump also indicated that he would solve a longstanding problem with offshore profits that U.S. companies park abroad, estimated by experts to be worth at least $2.3 trillion, by imposing a one-off 10 percent tax.

As the following chart illustrates, Canada already has a very low corporate tax rate, which should have provided an advantage in attracting new investments.

However, since the Great Recession ended and in the wake of the collapse of energy prices, having such a comparatively low corporate tax rate in Canada hasn’t seemed to boost either new investment spending, national productivity growth nor job creation. 

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