Global tax talks reveal trans-Atlantic differences

Proposals by United States President Joe Biden for the introduction of a worldwide minimum business tax rate of 21 percent could come unstuck because of reported opposition from British Chancellor of the Exchequer Rishi Sunak.

The Organization for Economic Cooperation and Development, which is overseeing the discussions involving 139 countries, hopes an agreement can be reached by the summer, but the Bloomberg news agency says that the British government is thought to be skeptical about the effectiveness of Washington's plan.

Although the United Kingdom is putting up its own corporation tax rate to 25 percent in 2023, in a bid to help public finances recover from the effects of the pandemic, it remains unconvinced about the long-term validity of the 21 percent rate.

Britain favors making companies pay taxes where sales actually occur, rather than where a company is based. A recent high-profile example of the consequences of this has been the case of Amazon, which has made use of having a base in the small European state of Luxembourg, which attracts many major corporations because of its tax arrangements.

The Independent quoted Paul Monaghan, chief executive of the Fair Tax Mark organization, as saying Biden's plans "would have a seismic impact on the likes of Amazon, Apple, Facebook and Google — who have tax dodging hard-wired into their organizational structure — with billions of additional taxes paid in both the US and across Europe", but London remains unconvinced.

Sunak is currently chair of the finance ministers of the G7 group of leading economic powers, who are scheduled to meet in London at the start of June, and will discuss the issue further. What is described as "a global solution to the tax challenges created by digitalization of the economy" is on their agenda.

Britain's opposition Labour Party has accused Sunak of hesitancy, rather than leadership, and has urged him to back the Biden proposal, but there are fears in Whitehall that the US does not want as major an overhaul of global tax rules, which are almost a century old, as Britain does.

The Financial Times quoted British Treasury director of business and international tax Mike Williams as saying where the tax was paid was arguably more important than how much, which was why the Biden proposal was not necessarily the best way forward.

"Minimum taxes might help, so long as they work, to ensure businesses pay tax, but it matters as well where tax is paid," he said.

"In terms of providing schools for the children of Coventry, it is not actually tremendously helpful if more tax is paid in California when it ought to be paid in the UK."