UK pushes for City of London exemption from global tax deal

[LONDON] UK Chancellor of the Exchequer Rishi Sunak is pressing for the City of London to be exempt from a plan by global leaders to make multinationals pay more tax to the countries they operate in.

Finance ministers from the Group of Seven advanced economies struck a historic deal last weekend that could force the world's biggest companies to pay a minimum corporate tax rate of 15 per cent.

Mr Sunak is expected to make the case that financial services, including global banks with head offices in London, should be exempt from the plan when talks move to the G-20 next month.

The Chancellor wants to make sure the "right companies pay the right tax in the right places," the Treasury said on Tuesday.

The Financial Times reported that Mr Sunak had raised the issue at meetings of the G-7 in London, citing people briefed on the talks. But US President Joe Biden's administration is wary of American tech giants such as Facebook and Amazon being unduly singled out.

The aim of the G-7 global tax deal is to stop multinational firms lowering their tax bills by shifting profits, make them pay more in countries where they operate, and adapt the system to capture trade in intangibles like data and information.

The rationale for excluding the finance industry was set out in the so-called "pillar one blueprint" of the deal, published last October.

According to the document, the financial services industry is generally required to have "appropriately capitalised entities" in each market jurisdiction, meaning their profits are generally taxed in each respective market.

BLOOMBERG