Biden’s bid to bring multinationals to heel

Should Britain get on board with his global tax proposals?

Tax! It’s been much in the headlines in recent weeks. The payment of, assessment of, tinkering with and even avoidance of – tax. It’s a big issue, particularly for big business. Take the revealing text exchange late last month between Boris Johnson and billionaire businessman, Sir James Dyson, in which the Prime Minister assured the entrepreneur that he would “fix” a tax issue. Dyson, whose technology company is based in Singapore – although the prominent Brexit supporter has recently changed his personal address back to the UK following considerable criticism – wrote to the Treasury seeking assurances that his staff would not have to pay more tax if they came to the UK to make ventilators during the pandemic.

The company had been developing their own ventilator, and when the top man received no reply, he texted the Prime Minister directly. Johnson quickly answered: “I will fix it tomo! We need you. It looks fantastic.” When Dyson sought further reassurance for the tax status of his company, Johnson texted back: “I am the First Lord of the Treasury and you can take it that we are backing you to do what you need.” Two weeks later, Chancellor Rishi Sunak told a group of MPs that the tax status of those coming to the UK to provide specific help during the pandemic would not be affected. Dyson’s company did not ultimately provide ventilators for the NHS and gained no financial benefit.

But the affair is revealing about the way government decisions are being made, and reinforces the belief that it’s “one rule for us and another for them”. When it comes to multinational giants such as Apple, Amazon and Facebook and the payment of corporation tax, the issue steps up a level and comes complete with global complications and manoeuvrings. These companies, and others, currently use low tax zones to avoid paying, what has been long claimed, their fair share of corporation tax. Now US President, Joe Biden, working with the OECD (Organisation for Economic Co-operation and Development), has proposed a new globally agreed minimum corporate tax rate of 21%. The scheme makes clear that locating profits in tax havens such as Ireland, Luxemburg, Jersey and the Cayman Islands will no longer work. There will be opposition, not least from those tax havens and the multinationals themselves, but experts reckon the President is onto a winner, and that’s money in the bank.

What our surveys show

Britain has been slow to respond to President Biden’s proposal for a new globally agreed minimum corporation tax rate of 21% on the multinational giants, but judging by the figures from our survey the Government need not fear any significant public backlash if it did throw its weight behind the scheme. As with our previous surveys on taxing the super rich, the majority of Brits are in favour of firm action, with a total of 82% either “strongly supporting” (53%) or “somewhat supporting” (29%) the idea of the UK giving its backing to the President’s plan.

Direct opposition to the proposal totalled just 10%, with 8% “somewhat opposed” and a mere 2% “strongly opposed’’. The final 8% said they “don’t know”. The current UK corporation tax rate stands at 19% and the average tax paid by the giants mentioned across all jurisdictions in which they operate is: Amazon, 11.8%; Facebook, 12.2%; Apple, 14.4%, (source Financial Times). President Biden stands ready but waiting for other governments to join the fight, while the multinationals and the tax havens are no doubt considering their tactical options, so let battle commence.