Joe Biden’s plan to introduce a global minimum tax has hit a snag as the UK and other Europeans push for exceptions, it’s like they want their cake and eat it.
A paragraph in the Guardian says what you need to know. “The Europeans don’t want to pull too many companies into this, they’re mostly interested in US tech.” It seems that the logic behind the plan to introduce global cooperation with corporation tax works like this. “Isn’t it disgraceful how large US techs sell products in our country without paying corporation tax? Isn’t it disgraceful how Joe Biden’s plan will hit our companies?”
A global tax rate is a good idea, but 15 per cent, really?
They are saying 'let’s have the cake of taxing US techs, and admire the cake of not taxing our companies.'
The UK stands at the centre of this logic.
According to the FT, the UK is lobbying for the City to be exempt from the Biden plan.
Part of the problem lies with pillars.
Under the Biden plan, pillar one involves an element of taxing companies based on the revenue generated in each country. Pillar town involves a global minimum tax rate.
Since the global minimum tax rate is less than the current UK corporation tax rate, the British government has no problem with pillar two.
But pillar one will hit the City.
So the UK wants financial services exempt from the plan.
Maybe the most pertinent comment was supplied by Heather Self, UK-based corporate tax partner at accountancy firm Blick Rothenberg. She told the FT: “Every country is trying to make sure they come out as a winner.”
The OECD previously submitted a proposal to exclude companies operating in natural resources, financial services, construction, sale and leasing of residential property, and international air and shipping business. The plan meant that banks, investment firms, insurers, miners are oil companies were to be offered exemption.
To put it another way, if it’s new, if it’s digital, if it’s disruptive, tax it. If it’s old, irrespective of the impact on climate change, ESG issues, and contribution to the 2008 crash, tread softly.
This all begs the question, do the UK and EU want a kind of Luddite favouring tax?
The techs should pay more tax, this is undeniable. The Biden plan attempts to grapple with this.
A global minimum corporate tax rate was always the answer, but global cooperation and willingness to compromise was always going to be the problem.
I fancy looking at that cake I ate earlier.
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