UK isn't sold on Biden's global minimum business tax plan

London

BRITISH officials aren't convinced by President Joe Biden's plan for a global minimum business tax rate of 21 per cent, according to a person familiar with the matter.

Chancellor of the Exchequer Rishi Sunak and his team are concerned that the US proposal for a rate of 21 per cent may be too high over the long term, even though the UK intends to raise corporation tax to 25 per cent 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 like 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, which is running the negotiations, is aiming for a deal in the summer.

While an official in charge of the talks said this month that progress is being made and that the 139 nations taking part could settle on a rate close to 21 per cent, British scepticism could potentially delay any agreement.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

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 Mr Biden's plan and is watching to see whether his proposal for a rate at 21 per cent is just an opening gambit, and how far opposition in Washington may force him to water it down, said the person. While Mr Sunak is planning a higher rate in the years ahead, he will want the flexibility to cut it again potentially below the 21 per cent level as a Conservative who favours low taxes, the person said.

Mr Sunak also wants a global deal and said in March he believes one is within reach while European Union 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 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 a 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." BLOOMBERG

READ MORE:

• One size may not fit all

• Global minimum corporate tax unlikely to cause US capital flight from Asia