As published on cityam.com, Monday 25 October, 2021.
A pair of Tory MPs have called for the UK government to pull out of the global corporation tax deal, claiming it could cost the Exchequer billions in tax revenues.
Backbenchers Greg Smith and Andrew Bridgen called for Rishi Sunak to reconsider his commitment to the deal, after he helped broker it at this year’s series of G7 meetings.
More than 130 countries, including the G20 bloc of rich nations, have agreed in principle to a global agreement, which seeks to cut down on multinational tax avoidance.
One part of the deal will see countries implement a global corporation tax floor of 15 per cent.
The second part will see countries able to tax the world’s largest firms 10 per cent on the profits they make in that country.
A new report from the free market Adam Smith Institute think tank claims the agreement “could cost £7 billion in lost tax revenues” if the UK signs up and other countries pull out.
The report says that figures from Italy’s Ministry of Finance show €43 billion in net profits were shifted to the UK in 2017 from firms around the world and that this adds up to £7bn of tax revenue.
“If the UK were to implement a global minimum tax, it is likely that at least some of those profits would be shifted elsewhere, with detrimental effects on the UK economy and government revenue,” the report claims.
Bridgen, MP for North West Leicestershire, said the “proposals as they stand would risk damaging the UK economy and further rewarding jurisdictions which are not implementing the measures”.
Smith, MP for Buckinghamshire, added: “To lock ourselves into global minimums will end up a race to the bottom, hampering competitiveness, enterprise and growth.”
A Treasury spokesperson said: “The historic global tax agreement backed by G7 finance ministers reforms the global tax system to make it fit for the global digital age, achieving a level playing field for all types of companies. The deal makes sure that the system is fair, so that the right companies pay the right tax in the right places.
“The final design details and parameters of the rules still need to be worked through, and the Office for Budget Responsibility will analyse and publish the fiscal impacts in the normal way.”