UK not convinced by Biden plan for 21% global minimum tax rate
The UK's finance minister Rishi Sunak and his team are concerned the coroporate tax rate championed by US president Joe Biden may be too high in the long term.
British officials aren’t convinced by US president Joe Biden’s plan for a global minimum business tax rate of 21%, according to a person familiar with the matter.
UK Chancellor of the Exchequer Rishi Sunak and his team are concerned that the rate may be too high over the long term, even though the UK intends to raise corporation tax to 25% in 2023 to repair public finances after the pandemic.
Britain wants the US and other nations to focus instead on measures to make big multinational companies — especially digital giants such as Amazon — pay more of their tax in countries where they operate, said the source.
Talks are under way over the policies. The Organisation for Economic Cooperation and Development (OECD), which is running the negotiations, is aiming for a deal in the summer.
For Ireland, president Biden's pitch for a 21% global minimum tax rate has high stakes because, if implemented, it would likely undermine the 12.5% headline tax rate that has anchored the State's prosperity over almost three decades.
While an OECD official in charge of the talks said this month that progress on a deal is being made, and that the 139 nations taking part could settle on a rate close to 21%, British scepticism could potentially delay any agreement. Britain’s Treasury said that finding an international solution to taxing the digital economy is a key priority for the UK.
“We welcome the US administration’s renewed commitment to reaching a solution to these challenges through the OECD,” a Treasury spokesperson said.
The UK is due to coordinate further discussions among Group of Seven allies when finance ministers meet in London next month. Working on “a global solution to the tax challenges created by digitalisation of the economy” is on the agenda for the June 4-5 gathering.
The UK hasn’t rejected president Biden’s plan, and is watching to see whether his proposal for a rate at 21% is just an opening gambit, and how far opposition in Washington may force him to water it down, said the source.
While Mr Sunak is planning a higher rate in the years ahead, he will want the flexibility to cut it again as a Conservative who favours low taxes, the source said. Mr Sunak said in March that he believes a global tax deal is within reach, while EU officials have also expressed optimism about the plan.
The today quoted Treasury official Mike Williams as saying a deal that only considered a global minimum tax rate wouldn’t be acceptable to the UK.
“The core UK proposition is that we’ve got to solve the digital tax issue, which we’ve been working on for years,” Mr Williams told an online conference hosted by Oxford University, according to the FT.
“It’s not primarily about a minimum tax,” Mr Williams said. “Minimum taxes might help — so long as they work — to ensure businesses pay tax, but it matters as well where tax is paid.”
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