US move on tax threatens London
US move on tax threatens London
By Eoin Callan in Washington
Copyright The Financial Times Limited 2007
Published: August 20 2007 03:00 | Last updated: August 20 2007 03:00
London's appeal as a financial centre is under threat from a proposed US law that would impose new taxes of up to 30 per cent on multinational companies that take advantage of the UK's favourable US tax treaty, diplomats and business groups have warned.
The new measure, known as the Doggett law after the Texas Democrat who proposed it, aims to prevent international companies avoiding US tax when they transfer funds from the US to parent groups via countries with favourable tax treaties, such as the UK, the Netherlands and Germany.
At present, companies with headquarters in countries that have no US tax treaty, such as Taiwan and Singapore, can avoid a 30 per cent tax on funds transferred from US subsidiaries by setting up a unit in countries with favourable treaties.
However, Congressional Democrats say the legislation is focused on "tax haven hide-aways".
Todd Malan, head of the Organization for International Investment, said it would unfairly discriminate against foreign companies that create US jobs and would interfere with legitimate business activity.
The proposed legislation would hit London because it acted as a financial clearing house for many global companies seeking access to capital markets and beneficial tax treatment, he said.
Mervyn Woods, head of tax policy at the CBI, said the plan appeared to run contrary to the spirit of a tax treaty between London and Washington.
Under the legislation, Samsung, the South Korean conglomerate, for example, would no longer be eligible to make tax-free transfers from its US subsidiary to its UK financing unit.
It currently pays a zero rate of tax on such transfers under an Anglo-American treaty, according to people familiar with the company's structure. Samsung's US subsidiary would instead pay a 15 per cent tax rate. Samsung said it would not comment.
By Eoin Callan in Washington
Copyright The Financial Times Limited 2007
Published: August 20 2007 03:00 | Last updated: August 20 2007 03:00
London's appeal as a financial centre is under threat from a proposed US law that would impose new taxes of up to 30 per cent on multinational companies that take advantage of the UK's favourable US tax treaty, diplomats and business groups have warned.
The new measure, known as the Doggett law after the Texas Democrat who proposed it, aims to prevent international companies avoiding US tax when they transfer funds from the US to parent groups via countries with favourable tax treaties, such as the UK, the Netherlands and Germany.
At present, companies with headquarters in countries that have no US tax treaty, such as Taiwan and Singapore, can avoid a 30 per cent tax on funds transferred from US subsidiaries by setting up a unit in countries with favourable treaties.
However, Congressional Democrats say the legislation is focused on "tax haven hide-aways".
Todd Malan, head of the Organization for International Investment, said it would unfairly discriminate against foreign companies that create US jobs and would interfere with legitimate business activity.
The proposed legislation would hit London because it acted as a financial clearing house for many global companies seeking access to capital markets and beneficial tax treatment, he said.
Mervyn Woods, head of tax policy at the CBI, said the plan appeared to run contrary to the spirit of a tax treaty between London and Washington.
Under the legislation, Samsung, the South Korean conglomerate, for example, would no longer be eligible to make tax-free transfers from its US subsidiary to its UK financing unit.
It currently pays a zero rate of tax on such transfers under an Anglo-American treaty, according to people familiar with the company's structure. Samsung's US subsidiary would instead pay a 15 per cent tax rate. Samsung said it would not comment.
posted by Carlos T Mock at 10:39 AM
0 Comments:
Post a Comment
<< Home