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Rishi Sunak slows support for Joe Biden’s plans for a minimum global tax rate of 21%, as Britain pushes the United States to ensure that any deal includes a fairer system for taxing digital technology giants.
The chancellor, who chairs the G7 finance ministers, said he would consider a global minimum tax only as part of a broader package, and Treasury officials feared Biden would force technology companies to pay taxes “to California when it should be paid in the UK “.
Sunak has received pressure from Labor to approve it the US plan for 21 percent global minimum corporate tax rate. Lisa Nandy, the shadow foreign secretary, accused Britain of showing hesitation and not leadership.
But the chancellor’s allies argued that supporting Biden’s plan would pass into the hands of Washington, which wants an early deal on a global minimum tax rate, mostly because the U.S. president also wants increase national corporate tax rates at 25-28 percent.
British officials feared that the United States would not be willing to accept a sufficiently radical system shaking up global tax rules – dating back to the 1920s – to reflect where multinationals make their sales, rather than where groups have a physical presence.
The UK was also concerned that even if the Biden administration approved a global agreement, it could still do so. to hesitate in Congress, leaving the UK high and dry.
Talks on renewing global taxation are taking place at the OECD and the G20, and the issue is sure to emerge when G7 finance ministers meet in London on 4 June.
At an online conference for Oxford University’s Center for Business Taxation, Mike Williams, the Treasury’s director of international and business taxes, said an agreement that only contemplated a global minimum tax was not politically acceptable.
“The UK’s basic proposal is that we need to solve the problem of digital taxes, which we have been working on for years,” he said.
Britain has introduced your own digital sales tax, which is expected to raise approximately £ 500 million in major US technology companies by 2024-5.
“It’s not primarily about a minimum tax,” Williams said. “Minimum taxes can help, as long as they work, ensure companies pay taxes, but it also matters where the tax is paid.”
“In terms of providing schools to the children of Coventry, it’s actually not tremendously helpful if more tax is paid in California when it should be paid in the UK,” he added.
But Britain is willing to make a deal that covers it both pillars of the Biden plan reviewing 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 priority: “It’s about finding a way to properly and fairly tax large international digital companies.” . He has promised to undo Britain’s digital sales tax if a multinational agreement is reached.
Sunak also said a minimum corporate tax rate of 21% was “higher than in previous discussions,” but that he was willing to discuss it. Ireland, with a rate of 12.5%, is fiercely opposed; Sunak is set to increase the UK rate up to 25% in 2023.
Nandy said the Biden initiative on a minimum global tax rate represented a historic opportunity. She is working with Shadow Chancellor Rachel Reeves 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,” he said.
Robert Palmer, director of the Tax Justice UK campaign group, called on the UK to support Biden’s plan and said the current position “was not a good look” for a government that has said it wants deal with tax evasion.
While the agreement on the table was not “perfect,” an overall minimum corporate tax rate of 21% would be a “game changer” to prevent companies from paying “very low” tax rates. to say.
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