Rishi Sunak may have to break income tax promise says expert
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The US President is pushing for a 21 percent rate as part of a plan to crack down on tax avoidance by multinational companies such as Amazon. One Biden administration official said the plan was an “important moment to demonstrate that the United States and democracies can deliver for the people”.
Mr Sunak previously said the 21 percent for business tax was “higher than where previous discussions were” but said he was open to discussions.
But now, a Treasury source has said the Government will not “rush to sign” a proposal from Mr Biden.
They told the Telegraph: “A minimum tax that means tax is paid elsewhere that ought to be paid in the UK will not fund the UK’s schools and hospitals.
“We’re not going to rush to sign up without a proper, more detailed on where tech companies pay their tax, something that you’re confident can be pushed through Congress.”
A Treasury spokesperson added: “Reaching an international agreement on how large digital companies are taxed is a priority for the Chancellor.
“However, it also matters where the tax is paid and any agreement must ensure digital businesses pay tax in the UK that reflects their economic activities.
“We welcome the US’ renewed commitment to tackling the issue and agree that minimum taxes might help to ensure businesses pay tax.
“However, it also matters where the tax is paid and any agreement must ensure digital businesses pay tax in the UK that reflects their economic activities.”
Chris Sanger, head of tax at accountant EY, added: “What pillar one is about is profits being taxed in different places.
“That’s why it is so political because you’re asking one government to basically accede taxing rights over its businesses to another country, based on where its customers are rather than where the intellectual property is.
“That’s why the UK is saying, ‘we want to pay for our schools and hospitals.
“We don’t want another government to be getting more tax from these companies.
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“We want that money coming into our coffers, to pay for our people because it is driven by our citizens.”
Julian Jessop, a fellow at the Institute of Economic Affairs, added how if the global minimum tax is too high it could “undermine healthy tax competition”.
He said: “If the global minimum tax rate is too high, it would undermine healthy tax competition between countries.
“If it is too low, it would not have any significant impact anyway.”
This comes after Labour said they will force a “vote of MPs on the proposal, via an amendment to the finance bill”.
Labour said the proposal is a “chance for the UK to show leadership and ambition” as well as protecting the British high street.
Rachel Reeves, the shadow chancellor, said the proposal was a “once-in-a-generation opportunity” to overhaul global tax rules.
She said: “By making sure they pay their fair share in Britain, we can level the playing field for our brilliant businesses and build an economic recovery with thriving industries, strong public services and good, secure jobs for all.
“The Conservatives have a choice: they can join Labour in tackling large-scale tax avoidance or they can allow billions of pounds to leave Britain.”
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