The head of the International Monetary Fund has strongly indicated City of London firms should not be exempt from the global tax plan agreed at the G7, after Rishi Sunak called for a special carve-out for the UK’s financial services industry.
When asked by City A.M. if she supported Sunak’s push, IMF managing director Kristalina Georgieva told journalists today that the G7’s finance ministers should “keep it simple” when it comes to the global tax plan and should strive for “few deviations from [the] broad principle”.
G7 finance ministers agreed last week to try and push through a global minimum corporation tax of 15 per cent in a bid to stop US-based tech giants avoiding tax.
The second pillar of the proposed plan is to target the 100 richest multinationals and make them pay 20 per cent corporation tax based on where their sales are.
Sunak said the deal would see “the largest multinational tech giants to pay their fair share of tax in the UK”.
However, the chancellor is also pushing for UK financial services firms to be exempt on the grounds that the crackdown is supposed to be aimed at Silicon Valley tech firms like Amazon and Facebook.
Georgieva said she personally told G7 finance ministers that “we should aim for simplicity”.
“Simplicity means the fewer deviations from a broad principle the better,” she said.
“Let’s remember developing countries have less capacity to administer tax and anything that is more complicated, all the other things equal, would create risks of derailing the purpose of generating more revenues to invest in health, education, infrastructure and the green transition.
“Keep it simple.”
The Financial Times reported earlier this week that Sunak wanted British banks to be exempted from the 100 richest companies part of the deal as strict regulations meant they generally paid the right amount of tax in each country they operate.
Treasury sources said EU countries were also in support of a carve-out for banks and other financial services firms, however Joe Biden is reportedly not as enthusiastic.
Any agreement on how multinationals are taxed needs to be signed off by the OECD as it oversees global taxation treaties.
An agreement between G7 countries would provide momentum toward an agreement at the G20 and for eventually clinching an OECD deal.
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.”