UK wins financial services carve-out from new global tax rules

Britain is set to secure an exemption for financial services from a new global tax system which was agreed by the Group of Seven economies to squeeze more money out of multinationals like Google, the Financial Times said on Wednesday.

Reuters had reported earlier this month that British finance minister Rishi Sunak was pushing for financial service firms to be exempt to help protect the City of London’s largest banks from paying more tax.

The FT said the Organisation for Economic Co-operation and Development, which is leading the reform of the global tax rules for companies, had accepted Britain’s case on a carve-out.

The new global tax rules are designed to make companies pay more tax in countries where they operate. Banks do typically pay taxes locally on profits made in different jurisdictions, the OECD said in a paper in 2020.

As part of the new deal, Britain will also remove its digital services tax. The FT said this was likely to happen in a staggered process. A spokesperson for Britain’s Treasury declined to comment.