The UK is pushing for the City of London carved out of the G7 global fiscal plan

Rishi Sunak, the UK’s chancellor, is pushing for a sculpture for the City of London to push the G7 for a new global tax system to cover “the world’s largest and most profitable multinational corporations”.

Sunak said that over the weekend “Historic deal” by G7 finance ministers it would force “the largest multinational technology giants to pay their fair share of taxes in the UK”.

But an official close to the talks said the UK was one of those countries pushing “for an exemption for financial services”, reflecting Sunak’s fears that world banks based in London could be affected.

HSBC, the UK’s largest revenue bank, generates more than half of its income from China, meanwhile Standard Chartered, another UK-based lender, does little business in Britain, with most from Asia and Africa.

Sunak has slammed the G7 talks in London, according to those who were briefed on the meeting, and his allies have confirmed they will continue to take heed when negotiations move to the G20 next month.

“Our position is that we want financial services companies to be exempt and EU countries are in the same position,” a British official said. But Joe Biden, president of the United States, wants to expand the scope of the tax so it doesn’t just touch on the American tech giants.

The Treasury said of the G7 agreement: “The agreement ensures that the system is fair, so that the right companies pay the right taxes in the right places.” It would now be discussed in more detail by G20 finance ministers and central bank governors.

Under the so-called “pillar one” of the agreement, it was agreed that countries could tax 20 per cent of the profits of the largest multinationals above a 10 per cent margin based on where the company has made its sales, regardless of whether they had a physical presence in that country.

The justification for the exclusion of the financial sector was established in October 2020 in a “pillar one” plan which said that financial services were a special case because they were generally required to have adequately capitalized entities in each jurisdiction and therefore paid the right level of local tax.

But Biden’s April proposals to define the type of companies included in the pillar one plan were intersectoral, based on the 100 largest and most profitable companies, and he raised the issue of financial services.

The G7 agreement is seen as an important step towards a global agreement under the auspices of the OECD, the Paris club of advanced economies, and the G20, which includes China and India.

Sunak said the proposals agreed to the G7 under pillar one of the world’s speeches – which reallocate an element of profits from the largest multinationals according to sales – would increase revenues to the UK tax authorities.

But neither he nor the Treasury have put any figures on this. TaxWatch, a think tank, has calculated that “Big Tech” companies will pay less taxes in the UK under the G7 plan than they currently do under the country’s digital services tax.

TaxWatch said that, based on 2019 revenues, Amazon, eBay, Facebook and Google would have paid £ 232.5 million less in G7 plans.

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