Tax loopholes favoring Big Tech need to be closed, but not at the cost of opening new ones. Global tax reform is bringing the conflicted incentives of post-Brexit Britain out into the open.
When the Biden administration took the unprecedented step earlier
this year of floating a global minimum business tax rate of 21%, U.K.
Chancellor of the Exchequer Rishi Sunak and his team took a dim view.
The Brits saw the rate as too high — despite Sunak’s own plans to lift
U.K. corporation tax to 25% — and not geared toward getting tech firms
such as Amazon.com Inc. to pay their fair share around the world.
Now that the G-7 has agreed to a 15% minimum rate
and a new tax on multinational profits that gives countries a crack at
collecting more, Sunak’s team still isn’t happy, according to the
Financial Times. They want an exemption for financial services,
including global banks with their head offices in London such as HSBC
Holdings Plc. The U.K. will keep pushing its case as talks move to the
Banks weren’t intended to be the primary target
of reforms designed to bring the global tax system into the digital age.
Under earlier proposals, finance, along with airlines, energy companies
and other industries, was supposed to be exempt, according to a French
parliamentary report. On that basis, you could argue the U.K. might be
trying to pull the bedcovers back a little from the Biden
However this mixture of resistance and
contradiction — or “evasion and sophistry,” as some tax campaigners have
put it — is becoming a habit for the U.K. It’s not going to help
build consensus around this tax deal beyond the G-7.
The specific worry here is less the existing tax
rate of City of London firms — 19 out of 20 top Western European and
U.S. financial companies paid an effective tax rate of above 15% in
2019, according to Bloomberg News — more who gets to tax
them. By reallocating taxable profits to better align with where value
is created, the U.K. could lose a slice of tax revenue....
more at Bloomberg
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