UK seeks tax shield for finance firms

The United Kingdom reportedly wants financial services companies exempted from the new global minimum corporation tax rate supported by G7 finance ministers.

The Financial Times newspaper quoted unnamed insiders with knowledge of the issue as saying that Chancellor of the Exchequer Rishi Sunak will ask for "a carve-out" for the sector.

While Sunak publicly hailed the G7 finance ministers' "historic agreement" as a way to ensure "the largest multinational tech giants … pay their fair share of tax in the UK", the paper said an official close to the talks noted Sunak did not think it was right for all types of enterprise.

The FT said Sunak is concerned about the impact the tax may have on global banks with headquarters in London. His reservations were passed on by officials who were briefed on the talks and by people with similar concerns among delegations from other nations, the paper said.

"Our position is, we want financial services companies to be exempt and EU countries are in the same position," the FT quoted an unnamed UK official as saying.

The new global corporation tax, which was initially aimed at US technology giants with subsidiaries in tax havens, has been championed by the US President Joe Biden.

It calls for companies to pay a minimum of 15 percent in tax and makes provision for those paying less because they have subsidiaries in tax havens to be taxed in their home nation, so their overall tax burden is 15 percent.

A spokesperson for the UK Treasury said: "The deal makes sure that the system is fair, so that the right companies pay the right taxes in the right places."

The global tax idea will next be discussed by finance ministers from G20 members, and by the governors of central banks.

Ultimately, the challenge of ensuring multinational companies pay a fair amount of tax is likely to be addressed by the 38-member Organization for Economic Co-operation and Development, which has been looking at options for years.

Sunak is understood to want financial services to be excluded because banks and similar entities are required to have appropriately capitalized presences in jurisdictions where they operate and to, therefore, pay the right amount of local tax.

However, the BBC said Biden believes financial services companies should be included.

Ironically, The Guardian newspaper noted that the TaxWatch campaign group believes the UK will end up collecting less tax from Google, Amazon, eBay, and Facebook because of the new global tax rate.

It said the UK will be out by about 230 million pounds ($326 million) a year in tax collected from the biggest four US technology companies, which currently pay around 330 million pounds through the UK's new digital services tax.