The financial services sector is defined on the basis of new global tax rules

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The UK is willing to insure one exemption from financial services from the new global rules for taxing multinationals, to an extent that would ensure that the largest banks in the city of London do not pay more taxes on their profits in other countries.

The Paris-based OECD talks, due to end on Thursday, have accepted Britain’s case of cutting the financial services industry the proposed new global tax system, as reported by two people on the negotiations.

But the victory of British Chancellor Rishi Sunak to haggle over the details of the new corporate impositions came at a cost, these people said. He had to make concessions in the United States to dismantle Britain’s digital services tax that focuses on American technology companies.

The cut in financial services came in the first part of the global tax negotiations at the OECD club of rich nations, which want to define where the largest multinationals should be taxed in the future.

The second part of the talks focuses on agreeing on a global minimum corporate tax rate of at least 15%, to prevent companies from shifting profits to low-tax jurisdictions.

In the first part of the talks, dubbed the first pillar, the UK and France have pushed for larger companies, especially US technology groups, to pay more taxes in the countries where they operate, but they are not necessarily located.

The United States agreed to focus on taxing multinationals more based on where they operate as long as other countries commit to eliminating their digital taxes, but surprised the UK by saying that the first pillar tax rules should be apply to all sectors, including financial services.

“It was a pure game between the United States, the United Kingdom and France,” said one person close to the negotiations.

The UK believed that financial services would be developed from the new global tax rules because regulation requires banks to capitalize separately in all jurisdictions in which they operate, so that they declare profits and tax in countries where they do business.

Without the exemption, the UK Treasury risked seeing the city banks pay less and more taxes to other countries.

The person briefed on the OECD talks said the US wanted to make sure the UK would make a more concrete commitment to early elimination of its digital services tax than it had done so far, but the at the time of their elimination they should be “carefully choreographed”.

The United States had initially wanted the UK, France, Italy and other countries with digital taxes to abolish them at the time the new global tax rules were agreed, but faced strong opposition from London and Paris.

A Sunak ally said, “This is a bit like handing over the keys to your car before you have money.”

But UK officials acknowledged that there should be a staggered process, with digital taxing countries taking a number of steps to eliminate them, while the United States is at the same time making moves to implement the new tax system. global.

Ally Sunak said: “I think it’s a pretty obvious point that Americans want national taxes on digital services to be abolished. They will be, but the whole issue has to be looked at in the round.”



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