Corporation tax: Increasing rate is 'dangerous' says expert
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The US President is pushing for a 15 percent rate as part of a plan to crack down on tax avoidance by multinational companies. Initially, Mr Biden was aiming for a 21 percent rate. One Biden administration official said the plan was an “important moment to demonstrate the United States and democracies can deliver for the people”.
MPs and Chancellor Rishi Sunak have previously said they will not “rush to sign” the proposed plans.
Mr Sunak previously said the 21 percent for business tax was “higher than where previous discussions were” but said he was open to discussions.
And now, Mr Biden has been handed a huge blow after Ireland joined the likes of Hungary, Estonia, the Cayman Islands, Bermuda and Peru who have all rejected the deal.
Ireland’s finance minister Paschal Donohoe said he was not in a position to join the agreement.
He said: “I was not in a position to join the consensus on the agreement and specifically a global minimum effective tax rate of ‘at least 15pc’ today.
“I have expressed Ireland’s reservation, but remain committed to the process and aim to find an outcome that Ireland can yet support.”
Mr Biden’s proposed plans seeks to allocate tax revenues more closely to the location of customers rather than intellectual property.
It also aims for a global minimum tax rate of 15 percent for the largest 100 businesses.
This figure is above Ireland’s 12.5 percent rate, or the 9 percent of Hungary, who has also refused to sign up to the plans.
Mathias Cormann, the secretary-general of the Organisation for Economic Co-operation and Development, said the deal “does not eliminate tax competition, as it should not, but does set multilaterally agreed limitations on it”.
During the G7 Summit last month, the leaders signed a historic tax agreement to tackle tax abuses by multinationals and online technology companies.
The agreed deal means multinationals will be forced to pay a corporation tax rate of at least 15 percent, and 20 percent of the profits of around 100 of the biggest firms – potentially including Google, Facebook, Amazon and Microsoft.
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This money would be reallocated to the countries where sales have taken place.
Of the deal, Mr Sunak said: “The UK has been pushing for reforms to make the global tax system fairer for years – and at last month’s G7 in London we achieved a historic agreement that will see the largest multinational tech giants pay the right tax in the right countries.”
Mr Biden’s proposal was previously attacked by Frank Furedi – author and emeritus professor of sociology at the University of Kent – who said only China and Russia will benefit from it.
He told Express.co.uk: “I think there are benefits for the US but not other countries.
“There are benefits for the Biden administration but not for Europe or those countries such as Hungary, Ireland and Singapore with low tax rates.
“They are entirely dependent on attracting foreign capital and this would undercut them.
“If the Biden proposals are accepted, the main beneficiaries would be China and Russia, who wouldn’t go along with this but will continue to have low corporation tax rates.”
Mr Furedi went on to say how the proposed corporation tax would create “particular problems” for a Brexit Britain and accused Mr Biden of encroaching “upon policymaking”.
The emeritus professor also claimed Mr Biden is only interested in taxing big digital companies because he wants American companies “to be as competitive as possible.
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