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Sunak cool on Biden’s proposals

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Chancellor Sunak is reportedly withholding support for the Biden administration’s proposals for a 21% minimum global business tax rate in order to ensure any agreement includes a fairer system for taxing digital technology giants. Speaking at a Wall Street Journal CEO conference, the chancellor said: ‘It’s about finding a way of appropriately and fairly taxing large international digital companies.’

At a recent online OUCBT conference, Mike Williams, HM Treasury’s director of business and international tax, said that minimum taxes might help but this was not the primary issue. ‘The core UK proposition is that we’ve got to solve the digital tax issue’, he said. ‘Minimum taxes might help, so long as they work … but it matters as well where tax is paid. In terms of providing schools for the children of Coventry, it is not actually tremendously helpful if more tax is paid in California when it ought to be paid in the UK.’

Ashley Greenbank, tax partner at Macfarlanes, said that while the Biden administration’s recent tax proposals were thought to be something of a game changer for reaching agreement on international reform, ‘the UK's reaction demonstrates how difficult that process is still likely to be. The UK's own digital services tax – which would have to be ditched as part of any agreement – is only expected to raise about £300m per year rising to £500m in 2024/2025. You might think that a global minimum tax at 21% might be more palatable as the UK seeks to increase its own corporate tax rates, but the shift in the US plans on the focus of the new international taxing right away from digital technology is, for now, proving a step too far.’