The purpose of the agreement is targeted at multinational tech companies, and the design of the proposals do not sit particularly neatly with how financial services businesses operate in reality.
The financial services sector is already subject to a number of sector-specific tax arrangements, which are designed to ensure that financial services profits are taxed in the appropriate jurisdiction – therefore, I would question why the G7’s overarching proposals should apply and a ‘carve out’ is justifiable.
While there is scope for better international co-operation it should be implemented in a way that is appropriate to financial services businesses.
There are obvious differences between the multinational tech companies and financial services firms, and these were highlighted in the OECD document of 2020.
The main difference is that financial services firms are very heavily regulated, and these regulations require them to have a substantial and well-capitalised (and taxable) presence in those territories where they are operating.
This also opens the door on whether stronger regulation of multinational tech companies would serve a more effective method of taxation than the current G7 tax proposals.
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