A huge number of actions are taking place now. It is far, far too early to have any definitive approach as to exactly what Brexit will entail. We have to ensure, to an extent, that we get as much of the benefit of being in the single market—I see that, obviously, in the context of the City of London and its passporting rights—as is compatible with the public’s clear view about free movement of people. I hope that in the months ahead we will begin to work on that. However, it is far too early, and it would be doing a disservice to all industries—oil and gas and others—that are so dependent on exports and on being global industries, with the expertise that they have across the globe, to be definitive about precisely what role Brexit has to play.
I wanted only to make a few brief comments on new clause 10 with regard to the patent box. I am sorry if I am moving slightly ahead of the observations of John McDonnell on this matter. There has perhaps been a danger that Governments of all political colours over the past decade or so have been rather too much in thrall to certain industries, whether financial services or the global internet technology industries. It is worth pointing out that the benefit—the very significant benefit—of the whole patent box plan that was put in place by the former Chancellor some years ago is that it has begun to enable intellectual property value to be quantified and used as collateral in many of the fast-growth companies in the technology sphere. It strikes me that the Treasury, any Treasury, will now need new sources of revenue to swell our collective coffers at a time when the deficits remain dangerously high. Indeed, in what might be regarded as normal peacetime conditions we have an unprecedentedly high rate of deficit.
I also think that it would be wise not to ignore the level of public anger at the wilful tax avoidance of a number of the digital disruptors that are potentially the beneficiaries of this patent box plan, and the influence of that on the western economies has at times been somewhat pernicious. The sobering truth is that the global technology and communications service providers’ stratospheric growth over the past two decades has been aided by their ability to avoid taxation. Whether it is Google, Uber, Facebook or Apple, to name but four, they have been able to squirrel away their profits in the most tax advantageous manner, and I hope that the Treasury will consider that, as well as issues around the patent box, not just in the next six months but in the years to come to ensure that we have a more equitable situation that will be accepted by the public at large.
I accept also that as regards creative industries and global technology players it would be wise to reflect that perhaps elements of this advantageous tax treatment, not just by the UK Government but by other Governments in the western world, have been the price that taxpayers have had to pay to secure the essential co-operation in the sphere of internet surveillance that western Governments believe—rightly, in my view—to be so vital to national security.
I do believe, however, that it is time to recognise that corporation tax as we know it is probably past its sell-by date as an appropriate means of capturing value in a modern globalised economy. A levy on turnover, rather than profits, might in time be the best way forward—[Hon. Members: “Hear, hear.”] I appreciate that the Floor of the House is perhaps not the place to be making policy, but I hope that the Treasury will at least give it some serious thought, particularly for these sort of industries. I always worry when “Hear, hear” comes from the wrong quarter, and I only wish there were a few colleagues on the Benches behind me to agree—but it came from Rob Marris and from elsewhere.
At the beginning of the year, Google made the headlines when it was revealed that despite employing some 2,400 people in the UK and harvesting a national estimated profit in excess of £1 billion—we obviously do not know exactly what that profit level was—it was able to pay corporation tax at a level of just 3%. Even before its recent travails, last year Apple declared foreign pre-tax profits of some $47.5 billion, on which it paid only $4.7 billion—some 9.9%—of tax, compared with group-wide income taxes of some $17.7 billion. That suggests that taxes on profits will not be the right way forward, particularly in these global industries where there is a risk that money can be squirreled aside. That said, it is important to say that the patent box, while purportedly and in some ways giving preferential treatment in this area at which we should look closely, has none the less brought some significant benefits.
One of the biggest problems that faces many internet businesses as they grow is the ability to quantify the value of their intellectual property rights. In many ways, failure to do that means that they do not get the opportunity to collateralise their book value to be able to borrow for the future. The patent box has made some successes in this regard.
I apologise for jumping the gun, as I know that we are slightly more interested in hearing the justification from the Opposition for their new clause 10. I do not feel that it would be the right way forward at the moment, but there are some important debates we need to have not just on the workings of the patent box-type legislation but on ensuring that we have a level playing field and a system that—more importantly—is understood and supported by the general public. Nothing has been more damaging for many of the big internet and technology service providers than the slew of bad headlines over the past few years about their avoidance of tax. In these difficult economic times, in particular, that is something that we can ill afford in this country.