Sunak urged to back Biden corporate tax plan ‘worth £13.5bn a year’

Campaigners say US global blueprint would help raise billions from multinationals and tech giants

Rishi Sunak has been urged to throw his full weight behind US proposals for a global minimum corporate tax rate after analysis showed it would bring in an extra £13.5bn a year for the public purse.

The campaign group Tax Justice UK said the Biden administration plan would help raise billions of pounds a year for the UK exchequer by hitting multinationals and US tech companies operating in the country with higher tax bills, including firms such as Amazon, Apple, Google owner Alphabet and Facebook.

Under the US blueprint, the world’s 100 most profitable multinationals would be forced to pay taxes to national governments based on the sales they generate in each country, irrespective of where they are based. It would also establish a global minimum tax rate to help bring an end to profit-shifting by multinationals and discourage countries from undercutting each other on tax rates. Washington has suggested a rate of 21%.

Finance ministers from across Europe – including from Germany, France and the Netherlands – have welcomed the US intervention as a signal that significant global progress can be made on tackling tax avoidance by big companies and digital firms.

However, tax campaigners said the UK government had been silent on the US plans, and urged the chancellor to give his full backing to Washington. The Labour shadow chancellor, Anneliese Dodds, also said Britain needed to play a leading role.

“Now that President Biden has moved the debate on, it’s important that our government moves to play its part,” she said.

Paul Monaghan, chief executive of the Fair Tax Mark campaign group, said other big European countries and the International Monetary Fund had responded publicly to the plan. “But we’ve heard nothing from Boris Johnson or Rishi Sunak in the UK as yet,” he said.

“The world has a once in a generation opportunity to embed tax justice and eradicate profit-shifting. It’s vital the UK steps up to the plate and publicly backs what the US and other progressives are trying to do.”

It is understood the UK Treasury recognises the need for an agreement on a global minimum tax rate as part of negotiations taking place at the Organisation for Economic Co-operation and Development (OECD), which is coordinating talks on tax reform between 135 nations.

However, sources said ministers wanted to make sure any solution was balanced and appropriately targeted, while also pointing to a track record of UK leadership on global tax reforms through the launch of a digital services tax last year. Designed as an interim measure before a global deal can be reached, the levy targets the British revenues of search engines, social media services and online marketplaces, and is similar to arrangements in France, Italy and Spain.

A Treasury spokesman said: “We welcome the US administration’s renewed commitment to reach a global solution this year.”

“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 continue to work openly and constructively with international partners to develop a consensus-based solution.”

Negotiations at the OECD are expected to centre on the threshold for determining which companies are in scope, as well as the rate for a global minimum. Although aiming for a deal by mid-2021, significant hurdles remain given the lower corporate tax levied by some nations. EU members vary from as low as 9% in Hungary and 12.5% in Ireland to 32% in France and 31.5% in Portugal.

Tax Justice UK said establishing a minimum rate would bring substantial benefits, including more tax revenue for the exchequer, and addressing public anger at tax avoidance by major companies.

Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk

According to research for the group by international experts, setting the global rate at 15% would bring in an extra £8.2bn a year for the UK government, while a rate of 20% would generate £13.5bn.

Setting the minimum at 25%, the level at which Sunak will peg the UK’s domestic corporate tax rate at from 2023, up from a current level of 19%, would bring in an estimated £22.3bn, while a rate of 30% would raise £31.6bn annually.

Robert Palmer, executive director of Tax Justice UK, said: “The government should stand up and support these proposals. The UK and its tax haven network have long promoted a global race to the bottom on corporate taxes – this needs to end.”


Richard Partington Economics correspondent

The GuardianTramp

Related Content

Article image
Sunak under pressure to back Biden’s global corporation tax plan
Labour expected to trigger Commons vote to force UK government to support proposal

Rupert Jones and Richard Partington

23, May, 2021 @9:30 PM

Article image
How would a global minimum tax work and why is it needed?
The Biden administration wants to end profit-shifting to tax havens by big tech firms and other multinationals

Richard Partington

09, Apr, 2021 @11:28 AM

Article image
Europe’s biggest economies ramp up pressure for deal to curb corporate tax abuse
France, Germany, Italy and Spain increase pressure for an end to loopholes that enable multinationals to pay minimal tax

Richard Partington Economics correspondent

04, Jun, 2021 @1:16 PM

Article image
Biden corporate tax plan could earn EU and UK billions, study shows
EU forecast to reap extra €50bn per year with UK expected to gain €200m from BP alone

Daniel Boffey in Brussels

01, Jun, 2021 @9:45 AM

Article image
Thinktank urges UK government to back Biden’s global tax plan
Proposal for 21% minimum corporate rate would generate additional £14.7bn for Britain, says IPPR

Gwyn Topham

31, May, 2021 @11:01 PM

Article image
G7 deal is as much about balance of power as global tax reform | Richard Partington
The real story includes the reconciling of domestic interests with international demands

Richard Partington

06, Jun, 2021 @3:10 PM

Article image
Tax avoidance: how to change corporate behaviour

It is up to consumers and voters to change the lousy behaviour of big banks, energy giants and internet multinationals. They will not change by themselves

Larry Elliott

19, May, 2013 @1:39 PM

Article image
G20 takes step towards global minimum corporate tax rate
Meetings of finance ministers follow change in US stance, with consensus growing on tackling tax avoidance

Richard Partington Economics correspondent

07, Apr, 2021 @2:33 PM

Article image
Global tax reform: 130 countries commit to minimum corporate rate
Landmark moment for world economy with OECD plan that also covers prevention of profit-shifting

Richard Partington Economics correspondent

01, Jul, 2021 @6:47 PM

Article image
OECD aims to stop tech firms shifting profits to low-tax locations
Multinationals would be forced to pay more tax in countries where they make biggest sales

Richard Partington Economics correspondent

09, Oct, 2019 @1:36 PM