The Daily Update: Global Corporation Tax

The US Treasury Department has proposed a minimum global corporation tax of 15% in negotiations at a tax steering group within the Organization for Economic Cooperation and Development (OECD). The rate is well below the initial proposal of 21% that Treasury Secretary Janet Yellen first recommended in April. The Biden administration has planned to raise U.S. corporate tax rate to 28% to finance Biden’s USD2.25tn infrastructure spending proposal.\

The new revised lower rate has been backed by the EU’s big three economies (Germany and France also backed a 21% minimum rate) and it is hoped that the approximately 140 countries within the OECD can reach a broad agreement within the next couple of months. However, the Treasury Department has stated that 15% will be the absolute minimum and that going forward negotiations should continue with the aim of pushing the rate higher.\

Here in the UK, the government is taking a slightly different view. It is concerned that the latest U.S. proposals do not address the challenge of ensuring large multinationals, especially the tech giants, pay more tax in the jurisdictions they generate their revenue. Whilst welcoming the US’s commitment to tackling the issue and agreeing that minimum taxes will help to ensure businesses their fair share of tax, Britain's finance ministry has said reaching an international agreement on how large digital companies are taxed ‘is a priority’.\

In March the chancellor Rishi Sunak said he will raise corporation tax on large companies from 19% to 25% from 2023, however there is scepticism that he will follow through with the plan. When answering questions for the government in the Lords, Lord Agnew, the Treasury minister said ‘Lower corporation tax rates are broadly a good thing. Personally, I do not like to see tax on productive activity, employment or any of the things that make a country prosperous, we should always aspire to lower tax rates, particularly on corporation tax’.