Rishi Sunak, British Chancellor, pushes for City of London waiver as part of G7 campaign for new global tax system covering ‘biggest and most profitable multinational companies’ .
Sunak said the “historic deal” reached over the weekend by G7 finance ministers would force “the biggest multinational tech giants to pay their fair share of tax in the UK.”
But an official close to the talks said the UK was among those countries pushing “for a financial services exemption”, reflecting Sunak’s fears that global banks headquartered in London could be affected.
HSBC, the UK’s largest bank in terms of revenue, generates more than half of its revenue in China, while Standard Chartered, another UK-based lender, has little business in Britain, mainly in Asia and Africa.
Sunak raised the issue during the G7 talks in London, according to those made aware of the meeting, and his allies have confirmed that he will continue to champion his cause when talks move to the G20 next month.
“Our position is that we want financial services companies exempt and EU countries are in the same position,” said a UK official. But Joe Biden, US President, wants to broaden the scope of the tax so that it doesn’t just hit US tech giants.
The Treasury said of the G7 deal: “The deal ensures that the system is fair, so the right companies pay the right taxes in the right places.” It would now be discussed in more detail by G20 finance ministers and central bank governors.
Under the “first pillar” of the agreement, it was agreed that countries could tax 20 percent of the profits of the largest multinationals above a 10 percent margin depending on where the The company made its sales whether or not they had a physical presence in that country.
The rationale for excluding the financial sector was laid out in October 2020 in a ‘pillar one’ plan which stated that financial services were a special case as they were generally required to have properly capitalized entities in each jurisdiction and therefore to pay the right level of local tax.
But Biden’s proposals in April to define the type of businesses included in the First Pillar plan were cross-industry, based on the 100 biggest and most profitable companies, and brought the issue of financial services to scale.
The G7 deal is seen as an important stepping stone towards a global deal under the auspices of the OECD, the Paris-based club of advanced economies, and the G20, which includes China and India.
Sunak said the proposals agreed at the G7 under the first pillar of the global negotiations – which would reallocate a portion of the profits of the largest multinationals based on sales – would increase revenues for the UK Treasury.
But neither he nor the Treasury have quantified on this subject. TaxWatch, a think tank, has calculated that ‘Big Tech’ companies will pay less tax in the UK under the G7 plan than they currently do under the UK’s digital services tax. country.
TaxWatch said based on 2019 revenues, Amazon, eBay, Facebook and Google would pay Â£ 232.5million less in tax under the G7 plans.