Business Taxes

Oral Answers to Questions — Treasury – in the House of Commons at 11:30 am on 24 June 2014.

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Photo of Richard Ottaway Richard Ottaway Chair, Foreign Affairs Committee, Chair, Foreign Affairs Committee 11:30, 24 June 2014

What recent assessment he has made of the potential effect of increasing tax on businesses on public finances.

Photo of George Osborne George Osborne The Chancellor of the Exchequer

Government analysis has shown that high corporate taxes have a negative impact on investment, jobs and growth, so we have cut the corporation tax rate from 28% to 21%. Next year, it will fall to 20%, the joint lowest rate in the G20. Increasing corporation tax, as some propose, would damage the economy, cost jobs and drive away investment. It is anti-business and we will not do it.

Photo of Richard Ottaway Richard Ottaway Chair, Foreign Affairs Committee, Chair, Foreign Affairs Committee

I welcome that answer. There is growing evidence that, in a number of sectors, where we have cut taxation, revenues are starting to rise. Does my right hon. Friend agree that those proposing increases in taxes are doing so for purely ideological reasons and because they are engaging in the politics of envy?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

Whatever their motivations—I think my right hon. Friend is right—we are absolutely clear about the results. It will put people out of work and ensure that investment does not come to Britain. We are against plans to increase corporation tax. Indeed, I think that most people from around the world would look on in bemusement if Britain were to increase its business taxes, as the Opposition propose. To come to the point, the Treasury and Her Majesty’s Revenue and Customs are now providing more dynamic modelling of the effect of tax cuts on investment and growth, and cuts in corporation tax and fuel duty are shown to have positive impacts on the economy.

Photo of Alison Seabeck Alison Seabeck Shadow Minister (Defence)

High profile companies operate schemes that lead to the UK economy losing out, and not benefiting to the fullest extent. Is the Chancellor aware that Google AdWords is de-ranking small firms if they do not stump up substantial funds? It means not only that Google’s profits go up, helped by its tax arrangements, but that the profits of small firms, such as those in my constituency, go down, and the Exchequer is the net loser. Will he please discuss that with his colleague, the Secretary of State for Business, Innovation and Skills?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

I will make a general point, which is that the internet has provided an enormous opportunity for many small businesses, because it has dramatically cut distribution and start-up costs and created all sorts of opportunities that did not previously exist for small businesses in Britain. If we believe in free markets and technological change, we should believe in the innovation that that brings. Specifically on the tax issue, we are working internationally—this cannot be done in one country—to ensure that the international corporate tax system reflects the digital economy and international business of today. We are helping to fund that OECD work, and we are expecting the first conclusions this autumn.

Photo of Marcus Jones Marcus Jones Conservative, Nuneaton

Employment is up substantially in my constituency of Nuneaton, and unemployment has dropped 20% in the past year. Does my right hon. Friend agree that it would be absolute suicide to increase employers’ national insurance contributions, and can he rule that out as part of our long-term economic plan?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

My hon. Friend has done some fantastic work with local businesses to increase jobs in Nuneaton and to ensure that small businesses expand. He is absolutely right that the Opposition’s plans for an increase in corporation tax, which they talk about openly, and for a jobs tax, which they talk about secretly, would be a double whammy that would put people out of work in his constituency.

Photo of Barry Sheerman Barry Sheerman Labour, Huddersfield

Is the Chancellor aware that most people do not mind paying tax if it is fair and transparent and if everyone pays their fair whack? When will he ensure that those people who avoid taxation actually pay it?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

We have put a huge effort—I pay tribute to the Exchequer Secretary who has led this work—into ensuring that we collect the taxes that are due. As a result, many billions of pounds more in taxes are collected. We are eliminating abuse that existed before we arrived, such as that on stamp duty, and we set our tax rates fairly. We do not have a situation, as we did under the previous Government, where people in the City were paying lower tax rates than the people who cleaned for them.