Time is running out to stop global corporate tax dodging

Sara Hall, Head of Movement and Partnerships at Tax Justice UK, explains why the UK’s current legislation to end global tax dodging does not go far enough.

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Sara Hall

US President Biden has recently put forward a plan which is a once in a generation opportunity to tackle global corporate tax dodging. He had originally proposed a global corporate minimum tax of 21 per cent.

According to analysis by Tax Justice UK, this would benefit the UK to the tune of an estimated £13.5 bn and would help level the playing field for British businesses. Small and medium-sized businesses in the UK can’t play the tax system to lower their tax bills in the way large multinational companies can. The plan would help to ensure that large international businesses like Google and Netflix would finally have to pay their fair share in tax. 

Brits despise tax dodging by large corporations so putting an end to this is hugely popular.

New research by Church Action for Tax Justice revealed that Biden's tax plan combined with reform of global tax rules would provide sufficient finance to vaccinate all those at risk of severe Covid. This could help bring an end to the Covid pandemic. The report has been welcomed by the former Archbishop of Canterbury Dr Rowan Williams and many other church leaders. 

In short, backing President Biden’s plan seems like a no brainer and all G7 countries have expressed their support. All but one. 

The UK Government – the host of the G7 meeting in June – is not explicitly backing the Biden plan. 

The Government’s position as laid out in the Financial Times appears to be that it is willing to block international agreement to introduce a global minimum corporate tax rate if there isn’t also a deal on taxing the tech multinationals – an international mechanism to replace the UK’s Digital Services Tax (DST).

This does not make much sense. Alex Cobham, Chief Executive of Tax Justice Network, has pointed out that: “The UK's position simply doesn't hold water. They’re claiming that they want to make sure tech multinationals are properly taxed, while blocking the best opportunity for a generation to curb corporate tax abuse across the board.” 

Since then Finance Minister Jesse Norman has clarified that the UK Government supports agreement on a global minimum tax without specifying further details.

It would be an international embarrassment at the G7 in Cornwall if the UK is the only country there not supporting concrete proposals to end global corporate tax dodging. 

Not everything in the Biden proposal is going far enough. Tax Justice UK together with the Independent Commission for the Reform of International Corporate Taxation (ICRICT) are calling for the global corporate tax rate to be set at 25 per cent – not at 21 per cent. This would bring the rate in line with the corporate tax rate the Chancellor will introduce in the UK in 2023. 

It is also imperative that in the international negotiations on the global tax rate lower and middle income countries get a fair deal. Tax Justice Network and others have proposed a simple way to do this.

But time is running out to persuade the UK to change its stance. The G7 Finance Ministers meet on 4 and 5 June and the Financial Times suggests that agreement might be reached as early as this Friday. Initial agreement could be reached at a rate of 15 per cent, which would not go far enough.

Those of us campaigning to not let the opportunity to end global tax dodging slip through our fingers have not got much time left. 

We hope you can join us and that together we can win.

You can sign the petition to stop global corporate tax dodging on the Action Network.

Sara Hall is Head of Movement and Partnerships at Tax Justice UK