New Clause 3 — Office of Tax Simplification
Parliamentary Commissions of Inquiry
Stephen Timms (Financial Secretary, HM Treasury; East Ham, Labour)
I think we can all agree that tax competitiveness is important, and it is a good thing that the UK consistently performs well in international comparisons of business environment. Mr. Gauke told us that we were 15th in the World Economic Forum's global competitiveness report in 2003. I am not quite sure why he chose 2003, but I can tell the House that in the latest edition of that report we are 12th. We have improved our position and are 12th out of 134 countries on the WEF's measure of international business competitiveness. The World Bank's study "Doing Business 2009" ranked the UK sixth out of 181 countries for ease of doing business and second in the EU. It is right that we compare the position in the UK with the position elsewhere, and I am pleased to be able to tell the House that those comparisons put the UK in a strong position.
On simplification, the Government have brought forward more than 50 measures since the 2007 pre-Budget report, and again we compare favourably, with the World Bank ranking the UK best in the G7 for ease of paying taxes in its 2009 "Paying Taxes" report.
On consultation, we have consulted formally on more than 50 per cent. of this year's Finance Bill, and informally on substantially more, such as oil taxation. Those affected by that are quite a self-contained community, so a formal consultation is not always necessary. The Government do not, of course, consult on tax rates, owing to the possible market impact and potential forestalling, but we are committed to consultation and our record underlines that.
Recent business tax reform, such as changes to the taxation of foreign profits, to which the hon. Member for South-West Hertfordshire referred—I am grateful to him and his hon. Friends for their support for our changes—is designed to modernise the corporate tax system to meet the demands of an increasingly globalised economy and to promote more long-term investment. That package will enhance the competitiveness of the UK business environment. I am bound to say that, at 28 per cent., the rate of corporation tax in the UK is at its lowest level ever, and is the lowest in all the G7 economies. The small companies rate, at £300,000, is very competitive internationally, with the highest threshold between the small companies and the larger companies rate.
Our record on competitiveness is strong. Mr. Heathcoat-Amory was right to say that tax competition is healthy, but I caution him against criticising the work on harmful tax measures. It is not right to characterise that as the establishment of a cartel, as he suggested. Things have been done that encourage tax avoidance, and it is right for companies to work together on that.
New clause 3 would establish an office of tax simplification. I was intrigued by the difference between the approach of the hon. Member for South-West Hertfordshire and that of the Leader of the Opposition yesterday. The hon. Gentleman told us that he would explain why that particular quango is a good thing, even though his party is committed to reducing the number of quangos. I missed that part of his speech, but perhaps we will hear it on another occasion. The new clause is unnecessarily bureaucratic. By contrast, we have conducted a series of tax simplification reviews, and we set out our progress in the Budget.