Britain’s chancellor of the exchequer Rishi Sunak. Picture: WPA/GETTY IMAGES/JOHN SIBLEY
Britain’s chancellor of the exchequer Rishi Sunak. Picture: WPA/GETTY IMAGES/JOHN SIBLEY

London — British officials are not convinced by President Joe Biden’s plan for a global minimum business tax rate of 21%, according to a person familiar with the matter.

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.com — pay more of their tax in countries where they operate, said the person, who asked not to be identified because the discussions are sensitive.

Talks are under way over the policies. The Organisation for Economic Co-operation and Development (OECD), which is running the negotiations, is aiming for a deal in the summer.

While an official in charge of the talks said earlier in May 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 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 in a statement. “It’s also crucial that any agreement includes changes to ensure digital businesses pay tax in the UK that reflects their economic activities.”

London meeting

The UK is due to co-ordinate further discussions among Group of Seven allies when finance ministers meet in London in June. 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 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 person. While 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 person said.

Sunak said in March be believes a global tax deal is within reach while EU officials have also expressed optimism about the plan. On Sunday, the Financial Times quoted Treasury official Mike Williams as saying a deal that considered a global minimum tax rate only would not 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,” Williams told a online conference hosted by Oxford University, according to the FT. “It’s not primarily about a minimum tax,” 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.”

Bloomberg News. For more articles like this, please visit us at bloomberg.com

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