The government is “gifting the biggest multinationals £131 million a week” by not signing up to a global minimum corporation tax proposed by US President Biden, Labour has said, a sum the opposition insists should be spent on public services.
Biden’s initial proposal of a 21 per cent tax rate could raise almost £15bn a year for the UK coffers if agreed at the forthcoming G7 summit starting on June 4 but rumours persist the agreement will be watered down to 15 per cent.
“This week is a chance for the government to back British business and help our public services rebuild out of the pandemic,” said shadow chancellor Rachel Reeves.
“Boris Johnson is gifting the biggest multinationals £131 million a week. Labour says let’s fund our NHS instead.
“Now that we’re out of the EU we have even more reason to show global leadership in cracking down on tax avoidance.”
This year’s Spring Budget set the UK corporation tax rate at 19 per cent, due to rise to 25 per cent in 2023 to help pay off the debts racked up through the coronavirus crisis.
Biden had initially proposed a 21 per cent rate for US companies’ overseas income but the US Treasury has said it is prepared to accept 15 per cent from other countries.
The UK appears to be “the biggest obstacle” on agreeing the higher rate, according to former prime minister Gordon Brown, writing in The Independent recently.
“This government seems set on weakening a deal that would bring billions back to Britain and stop our high streets being undercut by the likes of Amazon, Google and other big multinationals,” continued Reeves.
“If the Government is serious about seeing our high streets thrive, they must make sure the businesses on them – whether it’s on Armley Town Street in my constituency, or Market Square in the Chancellor’s – have a level playing field.”
Amazon made more than $44bn (£38bn) in revenue in Europe in the last financial year but, because profits are registered elsewhere, it paid zero tax. The basic rate of income tax for individuals is 20 per cent.
Jeff Bezos, owner of the online shopping giant, is understood to have increased his net worth by more than $75bn over the course of the pandemic in 2020. The average Amazon worker’s salary is $30,000, meaning it would take more than two million years to amass the same wealth Bezos has in less than 12 months.
A Treasury spokesperson said: “Reaching an international agreement on how large digital companies are taxed has been a priority for the Chancellor since he took office.
“Our consistent position has been that it matters where tax is paid and any agreement must ensure digital businesses pay tax in the UK that reflects their economic activities. That is what our taxpayers would expect and is the right thing for our public services.”
“We welcome the US’ renewed commitment to tackling the issue and agree that minimum taxes might help to ensure businesses pay tax – as long as they are part of that package approach.”