Labour steps up pressure on Rishi Sunak over Biden’s global tax plan
Labour has stepped up its push to get Rishi Sunak to agree to Joe Biden’s plan for a minimum business tax rate among the world’s biggest economies.
The party is calling on the government to put together a review of the effects of Biden’s proposal to implement a 21 per cent minimum on global business tax on OECD countries.
Sunak is reportedly not in favour of Biden’s plan as he wants to see more assurances on taxing the globe’s largest tech firms.
Shadow Treasury minister James Murray said Biden’s plan “will bring in billions of pounds in extra tax benefitting Britain, while stopping huge multinationals and online giants from undercutting our businesses”.
“By making sure they pay their fair share in Britain, we can level the playing field for our brilliant businesses, and build an economy fit for the future, with thriving industries, and good, secure jobs for all,” he said.
The Financial Times reports Sunak, who is chairing this year’s G7 meetings for finance ministers, has said he would only support a minimum tax rate if it came with a broader range of reforms that force large US tech companies pay more tax overseas.
The Treasury is concerned the plan will not force all multinationals to pay their fair share of tax on profits made overseas, despite initial assurances.
The UK government unilaterally implemented its own digital services tax last year on online marketplaces, like Amazon and Asos, for the business they do in the UK, however the chancellor has said it is only a stopgap until when a global tech tax can be agreed.
International agreement is needed on any new comprehensive online tax as the Organisation for Economic Co-operation and Development (OECD) oversees treaties on how profits of multinationals are taxed.
Sunak said in March that he was “very keen to see a resolution” on a global tech tax, with the chancellor making it one of his top three priorities in G7 meetings this year that are hosted by the UK.
The UK will lift corporation tax to 25 per cent in 2023 for the country’s most profitable businesses.
Mark Littlewood, director general at free market think tank the Institute of Economic Affairs, said Biden’s plan is “little different” than an illegal cartel.
“Competition encourages efficiency, innovation and the learning of best practice,” he said.
“That’s as true of competition in tax policy as it is in any market providing products and services. Attempts by a political elite to end or temper such competition should be viewed with considerable scepticism or even alarm.”
A Treasury spokesperson said: “Reaching an international agreement on how large digital companies are taxed is a priority for the chancellor.
“We welcome the US’ renewed commitment to tackling the issue and agree that minimum taxes might help to ensure businesses pay tax.
“However, it also matters where the tax is paid and any agreement must ensure digital businesses pay tax in the UK that reflects their economic activities.”