Sunday 27 October 2019 / 8:40 AM Economy / John McDonnell

Labour welcomes proposal for more comprehensive tax on multinationals

John McDonnell MP, Labour’s Shadow Chancellor, welcomes a report published today by Public Services International, Taxing Multinationals: A New Approach.

Describing the independent report as “exciting and important”, Labour has said “we’re looking closely into how we would implement this approach in government, and how we would champion the framework internationally.”

Professor Joseph Stiglitz, Nobel Laureate in Economics, says in response to the report published today: “It is time for countries to take both unilateral and multilateral actions to tax multinationals; Labour’s proposal to start taxing multinationals through formulary apportionment is the right way forward.”

‘Formulary apportionment’ requires multinationals to declare profits in the UK that reflect their UK share of global sales, labour, and assets. This would restrict profit-shifting, and would increase the profits on which multinationals have to pay UK corporation tax. The report estimates that the new approach could raise between £6 and £14 billion in increased corporation tax revenue for the UK every year, at current corporation tax rates.

The report:

  • Argues that this approach is fairer, could boost funding for public services, and would be better for British businesses, which are currently being undercut by multinationals under-paying tax.
  • Notes that India has already moved unilaterally towards adopting the new approach, and that the IMF and OECD having written recently in support of it, reflecting an emerging international consensus.
  • Criticises the UK Government’s digital services tax as full of loopholes and inadequate.
  • Says “the UK should now take a lead in supporting a new approach”, and calls for the approach to be championed internationally.

Campaigners and tax experts – including ActionAid and the Tax Justice Network – have called for years for a unitary taxation approach, in part because it would boost tax revenues for the Global South.

The report published today sets out a detailed plan for implementing the approach. It is authored by Sol Picciotto, Emeritus Professor at Lancaster University and leading expert on international corporate taxation, and Daniel Bertossa, Assistant General Secretary of Public Services International.

John McDonnell MP, Labour’s Shadow Chancellor, said:

“We welcome this exciting and important report on fair taxation of multinationals.

“We need to find a practical way for multinationals to pay their fair share to support the proper funding of our public services.

“We’re looking closely into how we could implement this approach in government and champion the new framework internationally.”



Notes to Editors

The report’s proposal has three key elements:

  • It advocates a “unitary” approach to taxation, which sees large corporations operating across borders as single entities.
  • It calls for tax to be paid by multinationals where economic activity occurs and value is created, rather than where large corporate entities ‘book’ or ‘bank’ their profits for tax planning purposes.
  • It then proposes a formula based on sales, labour, and assets to determine how much each company should pay in the UK.

The report is available online at: