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UK’s Sunak Says US Plan to Exit Global Tax Slump Could Work

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UK’s Sunak Says US Plan to Exit Global Tax Slump Could Work

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LONDON – British Finance Minister Rishi Sunak said a U.S. proposal to focus on the world’s 100 largest and most profitable companies as part of a global tax deal could work, but insisted that big tech companies should pay more taxes in the countries where they operate.

Sunak told Reuters that the Group of Seven was making “really good progress” on the long-disputed reform before finance ministers from the rich economies group travel to London for talks on Friday and Saturday.

The meeting will be their first face-to-face meeting since the COVID-19 pandemic struck. It is also the first since Joe Biden replaced Donald Trump as president of the United States, raising hopes for greater cooperation between Washington and the rest of the world.

“It certainly is something we can work with as long as it meets our goals of reaching the right companies and, on the face of it, it can,” Sunak said in an interview, conducted at his office at 11 Downing Street, when he asked. on the US proposal. “We just have to work out the details.”

The plan would simplify the approach to taxing multinational corporations. It would focus on the profits of the 100 largest companies that have benefited the most from globalization, including the tech giants, which have seen their businesses grow during the pandemic.

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Britain and other countries have worried that it cannot offset the possible impact of a parallel plan for a global minimum corporate tax rate that could funnel more money into the US coffers at their expense, just as they face the enormous costs of running their economies. . through the COVID-19 crisis.

Britain, which is chairing the G7 this year, is particularly concerned about missing an opportunity to address how global companies move their profits to low-tax countries, after eight years of negotiations that were halted by the Trump administration.

But Sunak, a 41-year-old former Goldman Sachs analyst whose meteoric rise in government had made him a potential future prime minister, praised his American counterpart, Janet Yellen, for “changing the dynamics” and said he had a way forward. based on the US proposal.

He cautioned that key points were still being worked on: “I can’t go into details, but my general point is that the approach that they have established in principle is something we can work with.”

“VERY STRONG SIGNAL”

In the absence so far of a global agreement on how to divide tax duties, Britain and other countries have imposed taxes on digital services targeting the revenue of tech companies.

Those taxes announced to Trump’s team that it started a process that could lead to trade tariffs.

The Biden administration suspended the process earlier this year. On Wednesday it announced tariffs of 25% on more than $ 2 billion in imports from six countries, including the United Kingdom, but suspended them for 180 days to focus on international talks.

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Sunak, speaking before the announcement of the tariffs in Washington, said that the 500 million pounds that Britain hopes to raise this year from its tax on digital services “gives you an idea of ​​what is appropriate” for the outcome of a deal. global.

Sunak said he remained “confident and optimistic” that the G7 could reach a tax deal in time to present it to the finance ministers of the broader Group of 20 economies in July, the target date for a global deal.

German Finance Minister Olaf Scholz told Reuters in a separate interview that he expected “significant progress” on tax at the London talks, but said all large digital companies should be covered by the new rules.

Some European officials are concerned that retailer Amazon, which has relatively low operating profit margins, is not covered under the agreed definition of profitability.

Sunak said that, beyond the numbers, reaching a tax reform agreement and advancing the alignment of the financial system more closely with the fight against climate change would show that international cooperation is working again.

“I think it sends a very strong signal that the big economies, the G7, can come together to work on tough problems … and figure out how to solve them,” he said. “We haven’t seen that in a while.” (Written by William Schomberg Edited by Chizu Nomiyama)

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