UK seeks financial services ‘exemption’ from minimum tax

British finance minister Rishi Sunak is pushing for the City of London to be exempt from a new global minimum corporation tax system championed by the Group of Seven (G7) economies, the Financial Times reported on Tuesday.

An official close to the talks said the UK was among those countries pushing “for an exemption on financial services” over fears that global banks with headquarters in London could be affected, the report said.

The rationale for excluding the financial sector was set out in October 2020 in a pillar one plan that said financial services were a special case because they were generally required to have appropriately capitalised entities in each jurisdiction and therefore paid the right level of local tax.

Sunak raised the issue at the G7 talks in London, the report added, citing people briefed on the talks.

The UK treasury department did not immediately respond to a Reuters request for comment outside business hours.

“Our position is we want financial services companies to be exempt and EU countries are in the same position,” the report quoted one British official as saying.

The United States, Britain and other large, rich nations reached a landmark deal last weekend to squeeze more money out of multinational companies as they backed a minimum global corporate tax rate of at least 15 per cent.

Sunak has said the proposals agreed at the G7 under pillar one of the global talks — which would reallocate an element of profits from the largest multinationals according to sales — would increase revenues to the UK exchequer. But neither he nor the Treasury has put any figure on this. TaxWatch, a think-tank, has calculated that Big Tech companies will pay less tax in the UK under the G7 plan than they currently do under the country’s digital services tax, the report said.