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 crackdown 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”.
The UK is resisting the proposal and instead wants reforms to focus on making multinational companies pay more tax in countries where they operate.
However, Labour will force “a vote of MPs on the proposal, via an amendment to the finance bill”.
According to LabourList, the Opposition party said “if the UK Government refuses to back the proposal, it will be undermining a global deal to tackle avoidance – while also allowing British businesses to be undercut by multinational corporations and online giants”.
Labour said the proposal is a “chance for the UK to show leadership and ambition” as well as protecting the British high street.
This comes after 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.”
Mr Sunak previously said the 21 percent for business tax was “higher than where previous discussions were” but said he was open to discussions.
A senior Conservative Party source said the Government was in discussion with the US and other countries on a global minimum corporation tax rate.
They told the Guardian: “But any agreement must come as part of a package, including a solution on fair taxation of large multinational digital companies.
“The Labour Party have been calling for a global minimum rate of tax, while at the same time voted against the rise in domestic corporation tax.
“It’s time the Labour Party made up their mind about where they stand.”
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An HM Treasury spokesperson previously said: “The UK has been proactive in pressing for an international solution to the tax challenges posed by digitalisation of the economy for a number of years.
“And the Chancellor [Rishi Sunak] has made it a key priority of the UK’s G7 presidency.
“We welcome the US administration’s renewed commitment to reaching a solution to these challenges through the OECD.
“It’s also crucial that any agreement includes changes to ensure digital businesses pay tax in the UK that reflects their economic activities.”
In 2023, the UK will lift corporation tax to 25 percent for the country’s most profitable businesses.
Mr Biden also wants to rise the corporate tax rate from 21 percent to 28 percent so “it hits profits in tax havens”.
The President wants to scrap an exemption from taxes for companies on the first 10 percent of earnings produced internationally and end tax preferences for fossil fuel producers.
The White House released details of the plan with administration officials describing it the biggest public investment programme since the Space Race of the 1960s.
Robert Palmer, director of campaign group Tax Justice UK, urged the UK to back Mr Biden’s plan.
He said the current position was “not a good look” for a government that said it wants to tackle tax avoidance.
Mr Palmer said while the deal was “not perfect”, Mr Biden’s 21 percent global minimum corporate tax rate would be a “game-changer” in stopping companies from paying low tax rates.
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