Clause 71 - Review of DST

Part of Finance Bill – in the House of Commons at 3:00 pm on 1 July 2020.

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Photo of Alison Thewliss Alison Thewliss Shadow SNP Spokesperson (Treasury) 3:00, 1 July 2020

We support a fit-for-purpose digital services tax. Our new clause 5 seeks a review of how effective the Treasury plan is. It would force the Government to assess the digital services tax’s effectiveness and draw conclusions on that information within six months.

It is unfair that multinational online firms pay less tax than small high street shops, and the SNP has long said that we would support a fit-for-purpose tax, but during the lockdown many people have become adept at finding what they need online, from replacement parts for the oven and a tablet and macaroon subscription in my case, to clothes, trampolines, desks, chairs, food and drink, and this period may well have a permanent effect on how people do their messages.

The high street has been facing difficulties for many years now, under fierce competition from digital competitors. Retailers including Intu, Debenhams, Oasis and Warehouse have gone into administration, and job losses were announced today at Harrods, John Lewis and Arcadia Group—all while online retailers are booming. It is not a level playing field, and it seems only fair that the taxation system catches up and seeks to level it out. I agree with Bridget Phillipson that streaming services are also a huge money-spinner, and I do not see why the UK Government would not want to get in on that action. Taxes going uncollected in an area that is growing would be useful to Treasury coffers right now.

As the digital services tax is a new measure, it is vital that we try to capture how effective it is. By their very nature, online companies can be nimbler than their bricks-and-mortar counterparts, and it is always possible to find loopholes. We will wait to see how successful the policy is, but it is regrettable that the UK failed to implement it alongside international partners, despite countries such as France, Spain and Italy seeking to introduce similar measures. I appreciate the difficulties and limitations of work in the OECD, but co-operation is all the more important in the face of the US attempting to apply pressure to shut down the measure. Steve Mnuchin, the US Treasury Secretary, has stated:

The United States remains opposed to digital services taxes and similar unilateral measures… As we have repeatedly said, if countries choose to collect or adopt such taxes, the United States will respond with appropriate commensurate measures.”

I wish the UK Government all the best in that fight, but it would surely be wise to enlist other countries for hauners, rather than taking the UK through this alone. I would be grateful if the Financial Secretary to the Treasury updated us on the progress of international co-operation.

On the subject of loopholes, I share the concerns that my hon. Friend Stephen Flynn made clear in our amendment in Committee on the significance of Scottish limited partnerships. SLPs have been used for a huge and well documented range of nefarious ends, including money laundering, arms running and undermining democracy, yet they are still being advertised as an ideal way to avoid paying tax and hide under a veneer of respectability. It is entirely conceivable that online companies could use SLPs or other such vehicles to avoid their obligations and shift their profits, and we in the SNP want to ensure that the Government are aware of this, and to encourage them to act. The abuse of SLPs has gone on for far too long.

The SNP supports the cross-party new clause 33, led by Dame Margaret Hodge, whose cross-party group on anti-corruption and responsible tax continues to do excellent work. We miss her insight today. I thank Mr Mitchell for his thoughtful observations on the role the UK should play. After all, what country would not want to lead in global transparency? Requiring companies subject to the digital services tax to publish a group strategy, including a country-by-country report, would add a great deal to tax transparency, as such a report could include information about the group’s global activities, profits and taxes. Parliament, in the Finance Act 2016, obliged the UK Government to adhere to country-by-country reporting, but that is yet to be implemented. We all have a duty to pay our fair share, and that mechanism would help ensure that that applies to the tech giants, as well as to each one of us.

We support Labour’s amendment 18, which would force the Tories to report annually on the digital services tax. The Bill states that the Government must conduct a review of the digital services tax and, prepare a report of the review before the end of 2025. The end of 2025 is a long time away; it is far too long. Governments may come and go in that time, or new technology be developed. Indeed, for our purposes we might also have independence, and be able to do these things for ourselves. This is a new tax and, as with all taxes, we must measure it carefully, assess it properly, and ensure that the intention behind it is reflected in the outcomes from levying it.