In Focus: Tax  

G20 leaders debate global tax rate hike

IMF solidarity tax

Earlier this week, the International Monetary Fund proposed a 'solidarity tax' on high earners and companies (such as online shopping giants) which prospered through the Covid-19 crisis.

As reported by FTAdviser, the short-term solidarity tax would mean companies that saw “excess” profits during the pandemic should be liable for “recovery contributions”, while wealth taxes on high earners should be considered by legislators on a temporary basis.

Commenting, Adam Dunnett, director at Zedra, called it a "bold idea" but questioned how it would work in practice. 

He said: "This is a bold idea and the spirit of the IMF’s statement, the intentions and motivations behind it are hard to fault. The difficulty comes in the details.

"Who would be asked to pay the tax and on what amount? The main target for this sort of taxation is, of course, the US-based ‘FAANG’ companies who are already being targeted outside the US through various digital service tax proposals and laws.

"A solidarity tax charge on those businesses would probably be popular globally but faces two obstacles. First, the US administration is likely to have objections.

"The second obstacle is that taxes on such businesses are often passed on to the customer pretty quickly. There is a chance that a one-time tax charge on these sorts of businesses could end up being paid by the people it is intended to benefit."