Unitary Tax Unsatisfactory, Britain Warns

The British government has warned the United States that it is not satisfied with the changes California has made to its “unitary tax” on multinational firms.

Britain wants the tax eliminated, the Financial Times reported.

The London-based newspaper said the warning came last week in a formal statement to the State Department by Sir Robin Renwick, British ambassador to the United States.

Gov. Pete Wilson on Oct. 6 signed legislation that was meant to mollify Britain and the other nations that have long objected to California’s system, which taxes a company on a percentage of its worldwide income.

The method, adopted in the 1970s, aimed to identify California’s “share” of a corporation’s worldwide payroll, property and sales.

The new legislation makes the unitary method applicable only to those companies that prefer it. Others would be taxed only on profits that their U.S. operations earn within California--the same taxation method used in all other states.

Renwick, speaking for the European Community and eight non-EC nations, said the countries would not be satisfied unless the latter system “was established as the only legitimate basis of taxing foreign companies in any state,” the Financial Times said.

Britain also has filed a brief with the U.S. Supreme Court in support of a unitary tax challenge brought by Britain-based Barclays Bank International. Barclays is one of about 30 foreign-based companies that filed suit in 1988, challenging the California tax as unconstitutional and seeking refunds.

The California Supreme Court upheld the tax, but the companies appealed to the U.S. Supreme Court.