U.K.’s Sunak Declares Global Deal on Corporate Taxation Is Within Reach
(Bloomberg) -- An international deal to agree new rules on corporate taxation is within reach, U.K. Chancellor of the Exchequer Rishi Sunak said, offering the prospect of fresh clarity for businesses operating digitally across borders.
“Digitalization has brought enormous benefits to consumers and businesses, but it’s also highlighted that the current international tax framework just isn’t fit for purpose,” Sunak told a Bloomberg event on Tuesday alongside his Italian counterpart, Daniele Franco, as he detailed his ambition for a ground-breaking accord. “That solution is within our grasp and I think that is positive.”
With the U.K. and Italy hosting the Group of Seven and Group of 20 respectively, such comments show the renewed vigor being injected into those forums on the matter in the wake of the coronavirus crisis.
An accord could bring a more comprehensive and even approach to global taxation in the post-Covid 19 era after years of frustration by governments struggling to reap revenue from large businesses able to transcend national borders. Aside from the public-finance imperative created by the crisis amid ballooning national debts, the change of presidency in the U.S. offers an opportunity to reach agreement.
“The new U.S. administration has a different approach and is very much cooperative,” Franco, Italy’s finance minister, told the online audience numbering as many as 1,000 people. He added that countries are working to a deadline of the middle of the year to find a solution, and that there’s “broad consensus” among the G-20.
Until now, the U.K. and other advanced economies have been thrashing out how to tax global companies such as Facebook Inc. and Alphabet Inc.’s Google through talks hosted by the Organization for Economic Co-operation and Development. In the absence of a deal, Britain and other countries have imposed their own digital taxes, leading to a patchwork of approaches.
The U.K. introduced a 2% tax on the revenues of search engines, social media services and online marketplaces which tap British consumers, while Italy has imposed a 3% digital tax on companies with overall revenues above 750 million euros ($894 million) and revenues from digital services in Italy above 5.5 million euros. Other countries bringing with their own domestic regimes include Austria and France.
“It’s in everyone’s interest from a corporate perspective to have a multilateral solution,” said Sunak. “What it will do is provide consistency and certainty, rather than what the current situation is, where you’ve got lots of bespoke regimes that individual countries are having to implement because we can’t find a multilateral solution.”
The U.K. chancellor said that current rules have their origins in 1920s tax treaties, adding: “we’ve come a long way since then, and those tax treaties weren’t really designed for the digital economy that we increasingly find ourselves operating in.”
This is the first time the two ministers have spoken publicly together about their priorities as the respective leads of the G-7 and G-20 finance tracks. Their dialog followed introductory address by Michael Bloomberg, the founder and majority owner of Bloomberg News parent company Bloomberg LP.
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