Britain and America are about to surrender our tax sovereignty

Britain and America are about to surrender our tax sovereignty

Published: 2nd November 2023 - 3:13 pm Category: General News

The international plan for a global minimum tax on multinational firms – under the OECD’s so-called Pillar 2 – is destructive for both the US and the UK. We have been among the most outspoken members of our respective legislatures on this flawed policy, but the OECD and many countries continue to pursue a global minimum tax in an effort to pad their coffers with US and UK tax revenues.

Unfortunately, our leaders are insistent on pressing ahead, and decisions they have made behind closed doors at the OECD have left us in a position where we now face an absurd attack on both our countries’ tax sovereignty. The US and UK have been world leaders in promoting competition and enterprise. The reforms of the 1980s pioneered by Ronald Reagan and Margaret Thatcher transformed our countries and the Western world. Now, the insidious plans under Pillar 2 put our economic freedoms at risk.

That is why we met earlier this year to discuss Pillar 2 and how to push back on it. And if you are a multinational corporation in the US or UK, you need to be making your voice heard as well. While this global minimum tax is billed as a way to prevent a race to the bottom in national tax codes, Pillar 2’s plan is to give foreign nations the authority to tax companies in their competitors’ countries if they feel that those firms are not taxed enough. The so-called undertaxed profits rule (UTPR) will disproportionately impact job creators and innovators in the US and UK.

Imagine two businesses in the same town – one successful and the other struggling. It would be irrational to allow the struggling firm to unilaterally decide that the successful business was making too much profit and force it to transfer some of that revenue into its own account. But that is essentially what the UTPR does: it transfers wealth from our countries into the accounts of others under the guise of fairness.

Pillar 2 does not make sense, and other countries are starting to recognise this. We have heard from ASEAN and African nations who are now decrying Pillar 2 as a bad deal for their development. They are watching as Pillar 1 – eliminating unilateral digital services taxes, from which they would benefit – falls apart and know that implementing Pillar 2 without Pillar 1 would be a barrier to growth within their own boundaries. They know that this scheme would discourage investment by foreign corporations and benefit high-tax jurisdictions.

In its current form, Pillar 2 isn’t ready for primetime – and even the OECD knows it. It delayed implementation earlier this year. But this was not a win. Delaying a bad policy for a year doesn’t change the fact that it is a bad policy. A recent snub to a US House Ways and Means delegation by French economy and finance minister Bruno Le Maire shows that some greedy countries have no interest in backing away from le transfert of funds into their treasuries.

US and UK policymakers and business leaders should combat this attempted takeover of tax policy. Each of our countries’ legislative bodies has the sole authority to set tax policy , and we should not cede that power to money-hungry foreign governments, which do not have the best interests of American or British citizens at heart. Successful US and UK businesses should be investing and supporting job and wealth creation, and our legislatures should defend them by not allowing foreign governments to use Pillar 2 to pillage their resources.

The only way to secure US and UK sovereignty is to fully abandon the global minimum tax and UTPR and return to the negotiating table in good faith to finish the work on Pillar 1. If that doesn’t happen, we are ready to combat this scheme on our turf.

In the US, I [Ron Estes] introduced the Unfair Tax Prevention Act, which, in effect, would impose a reciprocal tax measure toward any country that moves forward with a UTPR surtax on American businesses and would apply as long as the foreign country’s unfair tax remains in place. And in the UK, I [Priti Patel] pushed Chancellor Jeremy Hunt to assure the House of Commons and the British people that we will have regular updates and information as plans unfold instead of blindly barreling through with this disastrous plan.

The OECD and rapacious foreign governments should end their zealous approach to taxing other nations. And if they don’t, we stand ready to protect the Americans and Britons we represent.

Joint article by Ms Patel and Mr Estes in the Daily Telegraph, Thursday 2nd November 2023.

Rt Hon Priti Patel MP is a former exchequer secretary to the Treasury. US Representative Ron Estes is a former Kansas state treasurer.

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