America’s plans for a global minimum corporation tax rate would raise at least £13.5 billion a year for Britain, campaigners say.
President Biden has proposed reforms of the global tax system that would give countries taxing rights over the profits of US tech giants alongside a new minimum corporation tax that would end a two-decade “race to the bottom” between governments.
The plans would stop Google, Amazon, Facebook, Apple and other big businesses shifting profits from where they book sales to tax havens. A minimum global corporation tax would backstop the proposal, which the US has proposed would be 21 per cent.
Tax Justice UK, a pressure group, has calculated that a global rate of 20 per cent would raise £13.5 billion a year for the UK exchequer and at 15 per cent it would still raise £8.2 billion. The extra receipts would come from “increasing the pot of profits taxed at a decent rate” rather than simply increasing the tax on the existing profit pool, the group explained.
The calculation at 20 per cent was made before the Biden proposal for a 21 per cent rate was revealed this week. Under his plan, countries such as Ireland, the Netherlands and Luxembourg would lose as profits shifted from the UK to low tax jurisdictions would be taxed at the new minimum rate. The difference between the tax haven rate and the minimum global rate would then be paid in the UK.
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The proposals have been hailed as a breakthrough in efforts to end tax avoidance by large multinational companies. Robert Palmer, executive director of Tax Justice UK, said: “A new minimum corporate tax rate would bring in billions of pounds to support public services and would deal a blow to tax dodging.”
The Treasury has backed the US plan, which follows Rishi Sunak’s decision in the budget to raise corporation tax from 19 per cent to 25 per cent from 2023. A spokesman said: “Updating the international tax rules to ensure that digital businesses pay more tax in the UK, in line with their economic activities, remains a UK priority, and we will work openly and constructively with international partners to develop a consensus-based solution.”
Negotiations are now under way on the proposals, which build on work done by the Organisation for Economic Co-operation and Development.
