UK finance minister planning ‘diverted profits tax’: Sunday Times

(Reuters) – Britain’s finance minister, George Osborne, is planning to introduce a new “diverted profits tax” targeting multinational companies judged to have shifted profits overseas to avoid tax, the Sunday Times newspaper reported, citing government sources.

The 25 percent levy, more than corporation tax which is set at 20 percent, would be part of the annual budget due to be presented to parliament by Osborne on March 18, the newspaper reported.

Google Inc, Amazon.com Inc and Facebook Inc are among companies that have been widely criticized in Britain for tax avoidance and that could potentially be affected by the new levy, according to the Sunday Times.

The budget will be Osborne’s last before a national election on May 7 in which his Conservatives face a tight contest with the main opposition Labour Party. Polls suggest the two parties are neck-and-neck, while the picture is complicated by a surge in support for several smaller parties.

Against that backdrop, there have been reports that Osborne would come up with some popular and eye-catching measures in his budget, while remaining focused on fiscal austerity aimed at reducing a still-massive budget deficit.

The Financial Times reported earlier on Saturday that Osborne wished to “pull a rabbit out of a hat” and Treasury officials had been asked to present him with options. However, Osborne wanted any pre-election giveaway to be cost-neutral to fit with the overall fiscal strategy.

The Sunday Times report also said Osborne was in talks with junior coalition partners the Liberal Democrats about raising the threshold from which people pay income tax, a measure that would reduce the tax bill for hundreds of thousands of people.

The threshold, currently set at 10,000 pounds ($15,035), is due to rise to 10,600 pounds in April but the newspaper reported Osborne wanted to raise it by a further 200 pounds in addition to what was already planned.

The Treasury could not immediately be reached for comment. Details of the budget are not supposed to be made public before they are revealed to parliament, although it is not unusual for snippets of information about what is planned or what is under discussion to be leaked to the press.