Rishi Sunak withholds support for Joe Biden’s plans for a 21% minimum global corporate tax rate as Britain pushes the United States to ensure any deal includes a fairer system for tax the giants of digital technology.
The chancellor, who chairs the G7 finance ministers, said he would only consider an overall minimum levy as part of a larger package, with Treasury officials fearing Biden intended to forcing tech companies to pay taxes “in California when they should be paid.” Great Britain”.
Sunak was pressured by Labor to approve the American plan for a 21 percent overall minimum corporate tax rate. Shadow Foreign Secretary Lisa Nandy accused Britain of showing reluctance, not leadership.
But the Chancellor’s allies have argued that backing Biden’s plan would play into the hands of Washington, which wants a quick deal on a global minimum tax rate, not least because the US president is also seeking to increase national corporate tax rates at 25-28 percent.
British officials feared the United States was unwilling to agree to a disruption of global tax rules – which date back to the 1920s – to reflect where multinationals do their sales, rather than where groups have a physical presence.
The UK was also concerned that even if the Biden administration approved a global deal, it could still weaken in Congress, leaving the UK high and dry.
Talks on a global tax overhaul are underway at the OECD and G20 levels, and the question is sure to arise when G7 finance ministers meet in London on June 4.
Speaking at an online conference for the Center for Business Taxation at the University of Oxford, Mike Williams, director of the Treasury for International Business and Taxation, said a deal that only involved one global minimum tax was not politically acceptable.
“The fundamental proposition of the UK is that we have to solve the digital tax issue, which we have been working on for years,” he said.
Britain introduced its own digital sales tax, which is expected to raise around £ 500million a year from major U.S. tech companies by 2024-5.
“It’s not primarily a minimum tax,” Williams said. “Minimum taxes can help – as long as they work – ensure that businesses pay taxes, but it is also important to know where the tax is being paid.
“When it comes to providing schools for the children of Coventry, it doesn’t really help much to pay more taxes in California when they should be in the UK,” he added. .
But Britain is ready to strike a deal that covers the two pillars of Biden’s plan to overhaul global taxation: a global digital tax and the minimum global tax rate for multinationals.
The Chancellor told a Wall Street Journal CEO summit last week that the digital tax was the UK’s top priority: “It’s about finding a way to appropriately and fairly tax large digital companies international. ” He has promised to remove the UK digital sales tax if a multinational deal is struck.
Sunak also said that a minimum corporate tax rate of 21 percent was “higher than in previous discussions,” but that he was willing to discuss it. Ireland, with an overall rate of 12.5 percent, is fiercely opposed; Sunak is ready to increase rate in UK at 25% in 2023.
Nandy said the Biden initiative on a global minimum tax rate represented a historic opportunity. She is working with Rachel Reeves, the Shadow Chancellor, to push Sunak to put the issue on the agenda for next month’s G7 leaders’ summit in Cornwall. “We have to avoid a race to the bottom,” she said.
Robert Palmer, director of the Tax Justice UK campaign group, called on the UK to support Biden’s plan, saying the current position was “not right” for a government that has said it wants it. fight against tax evasion.
While the deal on the table was “not perfect,” a minimum global corporate tax rate of 21 percent would be a game-changer by preventing companies from paying “ultra-low” tax rates, he said. he declared.