RISHI LEADING TAX FIGHTBACK
Cash from internet giants will help pay virus debt as lockdown cost fears grow
CHANCELLOR Rishi Sunak is spearheading an international effort to make tech giants pay more tax.
As he steps up the rebuilding of Britain’s economy, he hopes to have a global pact in place by summer.
Mr Sunak will use June’s G7 conference in Cornwall to formulate the plan on tax regulations for online titans such as Amazon, Google and Facebook. If approved, the revenue will help to slash the country’s huge coronavirus debt.
The Chancellor revealed he has spoken to finance ministers around the world about the crackdown and
it is understood the US is keen to reach an agreement.
Traditional retailers have been hit hard by Covid and the series of lockdowns.
The Treasury is also coming under increasing pressure to finally reform or abolish “outdated” business rates, which target bricks-and-mortar businesses.
On March 23, Mr Sunak is set to unveil potentially dozens of tax measures to start paying off the virus debt and form a new 10-year tax plan.
In a sign that he will resist further lockdowns because of the size of the debt, it is understood that he has warned his Cabinet colleagues that they need to “look at the costs in the round” before considering imposing more restrictions in the future.
The Chancellor is already signalling that desperately needed reforms for social care in England may have to be delayed because of the lack of cash.
But the big prize for the Government is the tech giants, which, legally, pay a small amount of tax compared to traditional
‘It’s a priority to get agreement’
businesses because they can locate to low-tax jurisdictions.
For example, in 2019 Amazon made a £13.73billion profit in Britain but only paid £293million in tax because its Prime service is based in Luxembourg, which has a low-rate tax regime.
Lockdown also drove more people online to do their shopping, with Amazon sales rising by 51 per cent to £19.4billion last year.
The Chancellor believes that an international agreement on an online tax between the world’s seven largest economies, including the USA under President Joe Biden, will allow governments to rake in far more.
He said: “One of my priorities in the G7 this year, which I’ve already started work on, is to try to get international agreement on a new way to tax these companies.
“I spend a lot of time talking to my finance minister colleagues around the world about this issue.”
A Treasury source added: “The US has now signalled an openness to engage constructively in the debate and try to reach resolution on it – which is really positive.
“The Chancellor has spoken to the US Treasury Secretary Janet Yellen specifically about this.”
The source added: “An online sales tax is one of the options in the business rates review.
“On March 23 we will be publishing the summary of the responses to that consultation so you’ll be able to see what people have said to us about online sales tax as an option.”
The intention to require online giants to start paying more tax comes as the tech business model falls increasingly under the microscope.
Government sources have confirmed that the UK is considering a solution similar to one imposed by Australia, forcing Google and Facebook to start paying for using other people’s content. It is understood that Culture Secretary Oliver Dowden is looking at reforms to the media market and is holding Cabinet discussions on the issue, including on economic competition.
The Treasury is also setting up a digital markets unit to tackle the power of the online giants.
It comes as sources close to Mr
Sunak confirmed that he is warning colleagues over the cost of a fresh lockdown, amid fears of reimposed restrictions should infections rise again later this year.
There has been speculation that Mr Sunak has been leading efforts behind the scenes both to lift current restrictions more quickly and ensure they are not brought in again.
A source close to the Chancellor said: “There are lots of different costs – the cost of people losing their lives, it’s costing people not getting the treatment they need, it is costing people getting sick from the virus or something else.
“Then there are all the other costs that we’re talking about, whether it is children’s schooling and people’s jobs and their mental health.
“They’re all costs and one just has to look at it all in the round and make the right decisions on the balance of all those things.”
While Mr Sunak yesterday confirmed that the Government will announce its plans to reform social care in England by the end of this year, there is a suggestion that implementation of those reforms could be delayed – another victim of the financial cost of the pandemic, furlough scheme and lockdown.
A source close to the Chancellor said: “It’s not easy. No one has been able to solve that problem in a couple of decades.
“We will try to do it but we need to be mindful of that when you think about what are the options for reform, and then how would we pay for that reform as well.
“None of those options are cheap. So we need to think through that in the round.”
It is also understood that Mr Sunak is steering the Treasury away from imposing a “wealth tax” on people’s assets and homes or savings, to help pay off the coronavirus debt, but has not ruled out a raid on pension schemes.
It is understood that he does not believe there are billions of pounds in liquid wealth sitting in bank accounts that’s easy to tax.
But the Chancellor will unveil around 30 documents and consultations as part of the Tax
‘The US is now more open to it’