Budget Resolutions and Economic Situation

Part of Amendment of the Law – in the House of Commons at 1:53 pm on 23 March 2012.

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Photo of Charlie Elphicke Charlie Elphicke Conservative, Dover 1:53, 23 March 2012

I welcome the Budget. I particularly welcome the reduction in the rate of corporation tax. By April 2014, it will be 22%, the lowest rate in the G7. As I have previously argued, I would like us to go further and reduce business taxes, in time, to 15%. With lower taxes comes greater corporate social responsibility, however. We need a new social compact: low taxes and low rates, but business must pay up.

We need a sense of social justice and of corporate social responsibility in the tax system, especially for multinationals that are quartered overseas. Let us take the case of Google. We can examine that example because Google’s numbers are publicly available, unlike those of many other companies, and it is unfair to single out Google, as the practice that I am about to describe is widespread. It took about £2.15 billion in revenue from the UK in 2010, making an estimated £700 million profit, yet it did not pay any tax. In fact, it declared a loss of £22 million. I am all for the silicon roundabout, but it should not be a magic roundabout, in which going around it twice means not paying any tax or going round it three times, like Google, means turning a massive profit into a tax loss. Even with this routing through Ireland, it is not as if the company is paying in America either, as the effective tax rate in the United States is 2.4%. As I say, we need to take much further action. We need to know more about what other companies are doing and how much they are paying to the UK.

I thus propose a tax compact. The first element is that business tax rates should be low, simple and attractive. Secondly, however, business should have a social responsibility to pay a fair share of taxes. Thirdly, tax avoidance must be dealt with firmly and rules changed to ensure that a fair share of tax is paid. Fourthly, the European Union should support member states in protecting their tax revenues rather than undermining them at every turn, with discrimination rules gone mad, as it does at the moment. Fifthly, every multinational should publish the effective rate of tax paid on UK revenues, and no Government contract should be awarded unless a fair share of tax is paid in the UK.

These are my specific proposals. Tax is avoided by use of branch tax rules and by claiming to have a representative office and no tax presence. Used and abused are deductions of interest, royalties and management charges. We need to consider tightening the representative office rules so that people have a branch and pay a fair share of tax in the UK. We should consider tightening up on the abuse of the rules of deductions. We should consider tightening up on individuals who abuse personal service companies—and I do not mean only Ken Livingstone and a load of former Ministers, as there are many people up and down the country who have been abusing the tax system and avoiding paying tax in entirely unacceptable ways. Finally, we need reform in the European Union—first to the procurement rules and secondly to the tax rules—so that we can ensure that our tax base is protected and that people who work for the Government pay a fair share of tax to the Government on their fair profits.

Finally, on stamp duty avoidance, we need to consider an annual levy on all properties owned in a corporate wrapper—not just residential, but commercial properties should pay their fair share. I do not think that any stamp duty land tax or stamp duty predecessor was paid in relation to Canary Wharf. I think it is wrong that large commercial property companies do not pay their fair share as everyone else does. Everyone should pay a fair share of tax; that is what corporate social responsibility should be about. That is social justice. That is the deal in the tax compact: a lower rate of corporation tax, lower business taxes—but no playing the system.