I wrote about the Biden tax plan last week. I mentioned that it might raise an estimated £13.5bn pa for the UK at the weekend. And all that would be achieved by simply ensuring that companies should be taxed at a minimum rate of 21% in the country where they might really earn their profits, as indicated by the location of their sales.
The Biden plan is not, as such, new. I have been arguing that international corporate tax should be on this basis for coming on for two decades now. The OECD caught on much more recently. Country-by-country reporting, which is now an international norm, makes it possible. That is not by chance. I designed it to deliver this outcome, and it works.
And in all this the UK silence is notable. This could, of course, be because for quite baffling reasons the business of government has been suspended because of the death of Prince Philip, who literally has no role at all within it. Or it could be for more worrying reasons.
What I fear is that there is a very real risk that the UK may be an outlier on this issue now. So much about UK foreign policy now seems extraordinarily unpredictable (from the willingness to break international law, to the apparent attempt to use Northern Ireland as a negotiating tool with the EU, and even to break Ireland's own relationship with the EU) that we have to at the very least presume that the UK may be willing to play tough on this issue of international tax for its own supposed advantage, making it an issue of policy difference as it strives to create a new mark on the world.
So the UK might, entirely conceivably, defend its own tax havens and refuse to back a plan that it will say might harm them. You can imagine Jersey, Guernsey, the Isle of Man, Cayman, the BVI, Gibraltar and others all queuing up with their professional lobbyist partners to make the argument that the UK should do that.
There is also another possibility. I think there is a very real possibility that the UK might use support for Ireland on a 12.5% tax rate (opposing the Biden move as a result) as leverage on the Northern Ireland protocol against the EU. I once said on RTE that 12.5% was the national symbol of Ireland, and blow the harp. It was not popular but the reality is that this is the one issue on which there is almost no political divide between any party, whether in Belfast or Dublin, and so the opportunity for Johnson to play on this is real - and has to be taken into account.
Biden has made the right move. The OECD is delighted about it, and rightly so. Sensible tax campaigners should be backing both right now - whilst sweating the details, simultaneously and largely behind the scenes. But we should not ignore the possibility that the UK might become the centre of opposition to this.
The City of London, the Tories and the UK's tax havens are all instinctive opponents of this. And Johnson might gleefully seek to sow discord in and on Ireland. The risks are very high in that case.
There may be a campaign to be fought here.
And this blog will be fighting it, if need be.
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Reading all of this, it becomes apparent how important it will be to keep Trump out of the White House.
Today’s Guernsey Evening Press is running an article about the current corporate tax regime, with Deputy Parkinson claiming that it is “dead” and is “damaging”. He is suggesting an overhaul but I suspect that he is probably in a minority among the island’s lawmakers.
https://guernseypress.com/news/business/2021/04/12/international-tax-overhaul-called-for/
It would be good if he wasn’t
Coordinated response from Jersey? https://jerseyeveningpost.com/news/2021/04/12/zero-ten-tax-system-nearing-sell-by-date/
Blog in the morning…..
Anything the USA proposes or does will always be with the primary interests of the USA in mind. Any other country which signs up to this should think look and hard as to what the USA’s purpose is.
No country has done more in recent years to stymie international tax reform than the USA (under both Obama and Trump, incidentally). It is one of the very few countries which, domestically, did not adopt the hybrid mismatch rules proposed by the OECD and, internationally, is the only developed country which is not a signatory to the Multilateral Instrument which allows tax treaties between two countries to be amended to insert the other OECD BEPS action plans.
You ask where is the UK government on the Biden tax plan. You might equally have well asked where is the EU on this. Why should on earth should either be rushed into a response, or even more absurdly effectively sign up on the spot? That’s not how international negotiations work.
Someone made the perfectly reasonable comment on the FT article as to how this proposal would work globally, when you’ve got neighbouring counties (sic) WITHIN US states charging differing tax rates, let alone the vast differences in tax rates BETWEEN US states.
Finally, I would also point out that Biden has represented the state of Delaware for 50 years and not once has he ever called for any overhaul of the corporate governance and tax regime in that state.
First, the OECD is behind this, the US has fallen into line
Second, the mechanics are largely worked out
Third rate alignment us the goal, current disparities are the evidence it is required nit the evidence it is wrong
Fourth, maybe change can happen. Why assume not?
“the OECD is behind this, the US has fallen into line”
Let’s see. The OECD certainly have made no comment suggesting that they would support 21% as the global minimum rate of tax, which is Biden’s proposal.
OECD comprises members with much lower Corp tax rate than that, good luck trying to get capital exporting economies to sign up to 21%. It only takes one refusenik.
Whether you like it or not, countries compete for capital and labour, and tax is one of the policy instruments that many instruments use. Let’s not kid ourselves that some countries (looking at you, Ireland) are going to give that up.
You ignore how remarkably successful the OECD has been on such issues
And you ignore the relative power of states
Ireland could only do what it has with tacit consent. That may be going
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