Biden’s global corporate tax plan is wildly popular, so why isn’t Britain supporting it? | Polly Toynbee

Ohen something radical is proposed by an American president, the idea ceases to be “leftist” and soon becomes blinding evidence of common sense. Of course, the world should agree on a minimum corporate tax rate to end a race to the bottom in which countries compromise each other, depriving each other of tax revenues, which they need more than ever.

Never spoil a good crisis: there is no better time to change than to follow this global catastrophe where every country needs to repair its economy. The adoption of a universal tax floor puts an end once and for all to the scandal of tax havens where apparently respectable companies, pretending to all sorts of false social responsibilities, hide their money from the citizens who support them.

Joe Biden’s plan for an international agreement on a minimum rate of 15% has garnered phenomenal support, including from Germany, France, Canada, Italy and Japan. Ángel Gurría, the head of the Organization for Economic Co-operation and Development (OECD), the club of 37 wealthy nations, said a “once in a lifetime” deal is within reach and could be signed this summer.

Here is our national shame, yes, yet another: Britain is the only G7 country not to support it. Yesterday Labor tabled an amendment to next Monday’s Finance Bill demanding a review of the impact of applying this tax rate over the next few years. How much tax would it raise, how much dodging and evasion would it prevent, and what is the true size of the tax gap for the next two years?

The government will, of course, refuse. The numbers would be as embarrassing as Britain’s refusal to back the Biden plan. Here’s the conundrum: why should Boris Johnson and Rishi Sunak hesitate when they claim their own plan is to raise UK corporation tax even further, to 25% in 2023? It is very popular and seems to be one of the few measures that could give substance to the “race to the top” of expenditure. Labor suspects, as do tax campaigners, that it will be quietly dropped under heavy pressure from Tory businesses. What other reason could there be to block a lower tax hike than they claim to impose?

Here’s a hint. Answering government questions in the Lords, Treasury Secretary Lord Agnew gave the play: “Lower corporate tax rates are a good thing overall. Personally, I don’t like to see a tax on productive activity, employment or anything that makes a country prosperous… we should always aspire to lower tax rates, especially on tax on companies. Moreover, he wanted to undermine other countries: “We will try to always set it at a competitive rate, so that the United States, Canada, Korea, Japan and Germany will all have higher rates than the one where we are headed.”

Analysis by campaign group Tax Justice UK indicates that tax hikes would have brought in £13.5billion to the Treasury last year. This would rise to £22bn if the government sets it at 25%. A Church Action for Tax Justice report, signed by a group of bishops and former archbishops, calls on the government to promote the Biden plan, saying it could raise $640 billion globally, more than 27 times what it would cost to vaccinate the whole world. .

The government has offered various excuses, including that Biden is not doing enough to tax big tech companies in every country where they make their profits. The UK introduced its own Digital Services Tax (DST) before any international agreement, but Robert Palmer, the head of Tax Justice UK, points out that our DST raises £500m a year. Conservative tax phobia is a more likely explanation and a refusal to be restrained from undermining others in the future.

But another reason is Britain’s responsibility for so many tax havens. This would end this British-sponsored archipelago of tax avoidance in places like the Cayman Islands and Bermuda. Britain itself is a center for money laundering, with much laxer enforcement and lower fines than the US imposes on its banks.

Britain is blocking what the Tax Justice Network calls “the greatest opportunity for a generation to tackle corporate tax abuse at every level”, standing up against the world in defense of tax havens. It’s strange to inflict this shame on yourself: it’s hugely popular and would fetch big bucks for whatever else Johnson wants to spend — a few more bridges, perhaps.

Nobody knows with this government who influences ministers, who has their ear, what deals are struck or what winks and nods point to lucrative post-ministerial careers. With emails, text messages and WhatsApp circulating unseen by those responsible, we may never know why. But Labor shadow chancellor Rachel Reeves rightly sees it as prime territory – a grassroots tax to raise badly needed funds, which Labor would spend better. Labour’s corporate tax rate in 2010 was 28%, it is now 19%. Going back to that old rate will seem fair if Biden manages to raise the U.S. tax to 28%, as he plans, bringing in $2.5 billion over 15 years for his big spending program.

For those who think Labor is screwed, just count the ways this government is piling up its own goals.

This article was amended on May 21 and 25, 2021 to correct the name of the Church Action for Tax Justice group and to lower the proposed United States overall minimum corporate tax rate from 21% to 15%.

Luisa D. Fuller