London under fire from US tax moves

A proposed US tax law that could levy a 30% tax on multinationals that take advantage of the favourable US/UK tax treaty could threaten London's status as a premier financial centre.

According to an article in the FT, the new measure will apparently prevent multinationals from skirting tax in the US by transferring funds from the US to parent companies via countries with favourable tax treaties such as the UK.

The proposed legislation, named the Doggett law after the Texas Democrat who put it forward, will target the current system that allows companies with headquarters in countries with no tax treaties with the US, such as Singapore and Taiwan, to move cash into these jurisdictions through countries with tax treaties.

An example would be South Korean group Samsung, which would no longer be able to make tax-free transfers between the US and UK under the current Anglo-American treaty.

Democrats, however, have emphasised that the law will be specifically focused on tax haven that are used to hide earnings.

Further reading:

Darling on the offensive against UK 'tax haven' claims

International group set up to target tax haven abuse

UK changes 'will outdo Luxembourg'