British Finance Minister Rishi Sunak is pushing for financial services companies to be exempted from a new global tax system, which was adopted last week by the Group of Seven (G7) economies, say sources familiar with the negotiations.
One official said the UK ̵
G7 finance ministers announced on Saturday that they had agreed on a system to make multinational companies pay more tax in the countries in which they operate, along with a minimum tax rate of at least 15%. Read more
The deal was hailed as a sign of renewed global cooperation by the United States under President Joe Biden, who arrives in Britain on Wednesday ahead of a summit of G7 leaders.
But the US is opposed to any push specifically targeting US technology companies, while the UK is eager to avoid another hit for its banks after Brexit cost them access to markets in the European Union.
A British source stressed that the Organization for Economic Co-operation and Development, which is leading the reform of the global tax rules for companies, had proposed last year that financial service companies should be excluded from the application of ‘pillar 1’ of tax changes.
Banks typically pay tax locally on profits made in various jurisdictions, the OECD said in a 2020 paper.
Details of the agreement are to be discussed by the wider group of 20 countries next month.
“The global tax deal backed by G7 finance ministers is reforming the global tax system to make it suitable for the global digital age and achieve a level playing field for all types of businesses,” said a spokesman for the UK Treasury.
A spokesman for UK Finance, an industry group, said the tax system should seek to ensure that the UK remained an attractive place to do business and enabled the banking and finance sector to support the economic recovery.
A spokesman for the City of London financial district said the sector already pays more than 10% of total government revenue from all taxes, and the agreement being negotiated in the OECD aims for the system to be fair.
“We hope the negotiations will deliver an agreement that addresses the challenges of post-pandemic recovery … while providing a fair tax regime for multinational corporations, including financial services,” the city spokesman said.
British banks must already pay a tax on balance and surcharges on profits, something Sunak has said he is reviewing.
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