New Clause 23 - Review of impact of a global minimum rate of corporation tax

Finance Bill – in the House of Commons at 5:45 pm on 24th May 2021.

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‘(1) The Chancellor of the Exchequer must, within six months of the passing of this Act, publish a review of the impact on corporation tax revenues for the financial years 2022 and 2023 of a global minimum rate of corporation tax set at—

(a) 21 per cent in both years, and

(b) 21 per cent in 2022 and 25 per cent in 2023.

(2) Any review under this section must include an assessment of the impact of a global minimum rate of corporation tax on—

(a) levels of tax avoidance and evasion, and

(b) the size of the tax gap in financial years 2022 and 2023.’

Brought up, and read the First time.

Photo of Eleanor Laing Eleanor Laing Deputy Speaker and Chairman of Ways and Means, Chair, Standing Orders (Private Bills) Committee (Commons), Chair, Standing Orders (Private Bills) Committee (Commons)

With this it will be convenient to discuss the following:

New clause 6—Review of impact on corporation tax revenues of global minimum rate of corporation tax—

‘The Chancellor of the Exchequer must within six months of Royal Assent lay before the House of Commons an assessment of the effect on corporation tax revenues in 2022 and 2023 of a global minimum corporation tax rate set at 21%.’

This new clause would require the Government to publish an assessment of the revenue effect of a global minimum corporation tax rate of 21%.

New clause 12—Review of impact of Act on investment—

‘(1) The Chancellor of the Exchequer must review the impact on investment in parts of the United Kingdom and regions of England of the changes made by this Act and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) A review under this section must consider the effects of the changes on—

(a) business investment,

(b) employment,

(c) productivity,

(d) GDP growth, and

(e) poverty.

(3) A review under this section must consider the following scenarios—

(a) the United Kingdom reaches an agreement with OECD countries on a minimum international level of corporation tax, and

(b) the United Kingdom does not reach an agreement with OECD countries on a minimum international level of corporation tax.

(4) In this section—

“parts of the United Kingdom” means—

(a) England,

(b) Scotland,

(c) Wales, and

(d) Northern Ireland; and “regions of England” has the same meaning as that used by the Office for National Statistics.’

This new clause would require a report on the effect of the changes in the Act on investment, comparing scenarios in which (a) the United Kingdom reaches an agreement with OECD countries on a minimum international level of corporation tax and (b) the United Kingdom does not reach an agreement with OECD countries on a minimum international level of corporation tax on various economic indicators.

New clause 22—Eligibility for tax reliefs—

‘(1) For the purposes of Clauses 9 to 14 and 109 to 111 no tax reliefs shall apply to companies registered or with subsidiary companies registered in countries or jurisdictions listed in the EU list of non-cooperative jurisdictions for tax purposes.

(2) The Secretary of State shall also have the power to list additional jurisdictions or countries as non-cooperative jurisdictions for the purposes of subsection (1) that he/she perceives to be non-cooperative jurisdictions for tax purposes.’

This new clause would stop companies registered, or with subsidiary companies registered, in tax havens from benefiting from the UK Government tax reliefs in this Bill.

Amendment 1, in clause 9, page 4, line 2, at end insert

“provided that any such company which has more than £1 million in qualifying expenditure must also make a climate-related financial disclosure in line with the recommendations of the Task Force on Climate-related Financial Disclosures within the 2021/22 tax year.”

This amendment would, in respect of companies with qualifying expenditure of over £1 million, add a condition relating to climate-related financial disclosure to the conditions that must be met in order for expenditure to qualify for super-deductions.

Amendment 29, page 4, line 2, at end insert

“provided that any such company must also not be liable to the digital services tax”.

Amendment 30, page 4, line 2, at end insert

“provided that any such company which has more than £1 million in qualifying expenditure must also—

(i) adhere to International Labour Organisation convention 98 on the right to organise and collective bargaining, and

(ii) be certified or be in the process of being certified by the Living Wage Foundation as a living wage employer.”

Government amendment 2.

Amendment 31, page 5, line 15, at end insert—

“(11) Expenditure shall not be qualifying expenditure under this section if it is incurred by a company which has at any time been involved in arrangements giving rise to a liability for diverted profits tax, or which would give rise to such a liability but for the effect of section 83 of Finance Act 2015.

(12) For the purposes of subsection (11), involvement in arrangements shall include being connected within the meaning of section 1122 Corporation Tax Act 2010 to any company involved in such arrangements.”

This amendment would bar multinationals with a history of corporate tax avoidance from accessing super-deductions.

Photo of James Murray James Murray Shadow Financial Secretary (Treasury)

The vaccine has given us all hope, but we know that the health crisis from covid is far from over, and the impact on jobs, businesses and the economy resulting from the pandemic will be with us for a long time to come. People across our country and British businesses that have been struggling want to be able to get back on their feet. This Bill should have offered them the support they need to do so, but instead the Government chose to make half of all people in the UK pay more income tax, and its headline measure for businesses, quickly and with good reason, earned the nickname, “the Amazon tax cut”. This Amazon tax cut was proudly announced by the Chancellor as the new super deduction—a £25 billion tax cut that he has said represents the biggest two-year business tax cut in modern British history. What he was less keen to make clear is that this tax cut is not targeted at British businesses that have been struggling in the outbreak, but stands to benefit some of the biggest multinational tech firms that have done very well indeed over the past year or so.

As we have heard during previous debates on the Bill, small and medium-sized businesses can already benefit from the annual investment allowance. That allowance, extended by clause 15, offers a 100% tax break on investment up to £1 million, and we know that it will benefit almost all businesses already. The Financial Secretary to the Treasury has said exactly that. He stated very clearly in a written ministerial statement on 12 November last year that the annual investment allowance:

“Simplifies taxes for the 99% of businesses investing up to £1 million on plant and machinery assets each year.”

We pushed the Government on this matter in Committee of the Whole House, when the Financial Secretary claimed:

“The super deduction benefits all businesses that are in a position to take advantage of the eligible deduction it provides”.—[Official Report, 19 April 2021; Vol. 692, c. 764.]

He will know, however, that the 99% of businesses already benefiting from the annual investment allowance will benefit only marginally from the new super deduction.

The real winners of the super deduction were identified in Committee of the Whole House by my right hon. Friend Dame Margaret Hodge, who made the powerful argument that it will most benefit

“the companies with oven-ready capital investment plans, benefiting from the increased demand that they have enjoyed over the last torrid year—companies such as…the notorious tax avoider Amazon.”—[Official Report, 19 April 2021; Vol. 692, c. 751.]

As that phrase reminds us, Amazon already avoids paying much corporation tax in the UK at all by shifting profits to low-tax countries overseas—I will return to that point shortly—but it is depressing that, through his super deduction, the Chancellor is finishing the job Amazon started and wiping out the last little bit of tax it pays in this country.

As the House may remember, we asked the Government to look again at this matter in Committee of the whole House. Our amendment at that stage would have explicitly prevented the biggest tech firms from taking advantage of the Chancellor’s tax break, as well as other big firms that do not support workers’ rights and the living wage. At the time, the Financial Secretary to the Treasury objected to our amendment on the basis that it sought to

“restrict the relief only to certain companies”—[Official Report, 19 April 2021; Vol. 692, c. 742]

and that it imposed “burdensome conditions” on companies that want to benefit from it. That latter phrase told us plenty about the Government’s views on people’s rights at work. The conditions the Minister saw as “burdensome” are the rights to organise and to be paid a living wage. When even basic rights at work and a living wage are seen as burdensome, it is perhaps no wonder that this Government broke their promise to include an employment Bill in the Queen’s Speech earlier this month.

It is clear that we will need to push Ministers over workers’ rights on future days—from banning the shameful practice of fire and rehire to ending exploitation by rogue umbrella companies—as cross-party amendments tabled to this Bill by right hon. and right hon. Members seek to achieve. Today, we have made it very straightforward for the Government, through amendment 29, to focus specifically on preventing the very biggest tech firms—those companies liable to pay the digital services tax—from benefiting from the super deduction. This should be easy. Only a very small number of very large multinational firms that have done very well over the past year are liable for the digital services tax. The detail of that tax means that businesses are liable only when a group’s worldwide revenues from digital activities—such as providing social media platforms, search engines or online marketplaces—are more than £500 million, and when more than £25 million of these revenues are derived from UK users.

The vote on this amendment will come down to the very simple question of how Members of this House believe public money should be spent. As the Bill stands, the Government’s biggest business tax cut in modern British history will finish the job Amazon started, wiping out the last bit of tax it had to pay on the few parts of its business the profits of which it has been unable to shift overseas. A vote in favour of our amendment 29 would stop Amazon and a small number of similar firms benefiting from a giveaway of public money—public money that could be better spent for so many purposes, including to support British businesses that have been struggling throughout the past year. I urge Conservative Members to consider how they vote on amendment 29.

Before we come to that vote, I will turn to our new clause 23, through which we seek to push the Government finally to back President Biden’s plans for a global minimum corporation tax rate. I have explained how the Government’s super deduction will wipe out Amazon’s remaining tax bill in the UK, and how the amount it was due to pay in the first place was paltry compared with what it should be paying. Despite its business success in the UK, profit shifting to Luxembourg meant Amazon’s corporation tax contribution in the UK in 2019 was less than 0.1% of its turnover. People are fed up with large multinational companies avoiding their tax. It goes against the fairness that must be at the heart of our tax system, and in this year of all years, when so many British businesses are struggling to get back on their feet while Amazon’s business booms, it is clearer than ever that change is long overdue.

We have heard brazen claims from the Government about their work to combat international tax avoidance. In the debate in Committee of the whole House on this Bill, the Minister went so far as to claim that the Government have “led the international charge” in a number of ways, yet since the Biden Administration announced their proposals for a global minimum corporate tax rate, we have seen that, not for the first time, actions from the Government fail to match their words, with the UK now the only G7 country not to back the US plan. This is a once-in-a-generation opportunity to grasp the international agreement on the global taxation of large multinationals that has evaded our country and others for so long, yet rather than stepping up, our Government are stepping away.

Photo of Jesse Norman Jesse Norman The Financial Secretary to the Treasury

The hon. Gentleman advances the extraordinary claim that the UK is the only country among the G7 not to have backed the Biden plan. Will he put in the Library the evidence for that claim?

Photo of James Murray James Murray Shadow Financial Secretary (Treasury)

I am very happy to put in the Library references to comments from the other G7 countries indicating their support, but what I ask the Financial Secretary to do is put in writing the support from the UK Government for the plans proposed by President Biden, which he should be able to do today. He should act, because the British people want the Government to act. He need only look at polling carried out at the end of April by Yonder, formerly Populus, which showed overwhelming public support for action to tackle global corporate tax avoidance: three quarters of respondents thought that

The UK should play a leading role.”

The polling also showed that less than a third of people

“trust Rishi Sunak and Boris Johnson to tackle global tax avoidance”.

The public are right to be sceptical, because the Government have shunned ample opportunities to come out in favour of President Biden’s plans; indeed, since we began debating the Bill, I have put them to the Financial Secretary and his colleagues three times. On Second Reading, I urged the Exchequer Secretary

“to confirm to the House that she and the Chancellor back plans for a global minimum corporate tax rate and that they will do all they can to make this a reality.”—[Official Report, 13 April 2021; Vol. 692, c. 197.]

She did not respond. In case his colleague’s lack of response was simply an oversight, I asked the Financial Secretary in Committee of the whole House

“to confirm whether the Chancellor backs plans for a global minimum corporate tax rate”—[Official Report, 20 April 2021; Vol. 692, c. 897.]

He refused to do so, saying only that the Government

“welcome the renewed commitment that the US Administration have made in this area”.—[Official Report, 20 April 2021; Vol. 692, c. 914.]

In a debate the following week, I put the question to him again, as simply and directly as possible:

“does the Chancellor back the plans proposed by the US President?”—[Official Report, 28 April 2021; Vol. 693, c. 415.]

The Financial Secretary replied:

“I do not think it is appropriate for Ministers to comment on tax policy in flight”.—[Official Report, 28 April 2021; Vol. 693, c. 418.]

It is very hard to conclude anything from that pattern of responses other than that the Government are not backing these proposals to succeed.

We know that much of the discussion around President Biden’s plans and the proposals formulated in recent years by the OECD and G20, with which his plans largely align, has centred on the so-called pillars 1 and 2 of any agreement. In broad terms, pillar 1 relates to where profits are taxed, while pillar 2 relates to a global minimum corporate tax rate. Both are important to developing a fairer tax system, both feature in President Biden’s proposals, and the Opposition want to see progress on each.

We have been trying to understand why the Government are so reluctant to get behind President Biden’s plans. There was a suggestion in the Financial Times last week that what the UK wants is more movement on where large multinationals pay taxes—pillar 1—before it will agree to support the President’s global minimum corporate tax rate, pillar 2. The paper quoted a UK Treasury official:

“The core UK proposition is that we’ve got to solve the digital tax issue…It’s not primarily about a minimum tax”.

To quote the chief executive of Tax Justice Network, that argument is “absolute nonsense”. Many commentators have joined him in taking a very sceptical view of what the UK claims its position to be; they point out that President Biden’s plans include steps to make progress on pillar 1, and that although any estimates are necessarily rough, pillar 1 would bring in only a few per cent. of the estimated £14 billion that a global minimum corporate tax rate at 21% under pillar 2 would raise.

A report by Bloomberg, however, implied that the real reason behind the Government’s position may be cynically to disguise their real agenda: a desire to keep alive the possibility of a race to the bottom in the future. That would be such a damaging and short-sighted approach. People are fed up with the race to the bottom. We thought that even the Chancellor had had a conversion when he admitted to the BBC’s “Today” programme around the time of the Budget that years of Conservative economic policy had failed, telling the BBC that

“there was an idea” that corporation tax cuts

“could help spur investment, and what we’ve seen over the past few years is that we haven’t seen a step change in the level of capital investment that our businesses are doing as a result of those corporation tax decreases.”

After years of people being frustrated with tax avoidance by the biggest multinational companies, the new global deal finally within reach would be a game changer. It would raise billions of pounds a year for investment in our British public services and industry, it would stop British businesses being undercut by large multinational firms that shift their profits overseas, and it would change the behaviour of Governments around the world by calling time on the race to the bottom with tax rates. That is why a global minimum corporate tax rate is so important.

This is a once-in-a-generation opportunity. It would be a shameful failure for our Government, at the G7 meeting that we are hosting in Cornwall next month, to fail to lead on securing a global deal. It is crucial that we show support and help to build momentum behind the Biden Administration’s ambitious plans.

Already, we have seen the US waver on the initial rate of 21% that it floated in April, with the US Treasury now speaking of 15%. It has been reported that that change came following meetings last week that the US had with negotiators from other countries. Crucially, its Treasury underscored that 15% is a floor, and that discussions should continue to be ambitious and push that rate higher. That makes absolutely clear that what other countries say and do matters. It would be unforgiveable if the UK’s reticence so far to back President Biden’s plans had already played a part in allowing the starting point for negotiations to slip to 15%, rather than a rate of 21% as initially suggested. The latest turn makes it even more urgent than before for the UK to step up and back US plans for an ambitious global deal.

As new clause 23 sets out, the Government should look at the impact of a global minimum corporate tax rate of no lower than 21%. Since the Bill raises UK corporation tax to 25% in 2023, we ask the Government to consider the impact of a global minimum rate following that set in the UK. A global deal is vital to stop our country’s corporate tax policy being set—as it is effectively set today—by tax havens and others competing in a worldwide race to the bottom. When others cut their rates of corporate tax, we are hit by a pressure to the UK rate, by a loss of vital revenue, and by our businesses who pay their fair share being further undercut.

As a country, we should never reward those who do not play fair. We need a Government who will do whatever they can to end the race to the bottom that currently allows a few large multinationals and tech giants to avoid paying their fair share of tax. The race to the bottom by tax havens and others means that British people miss out on the benefit of tax that should be paid here, and British businesses are undercut by a few large multinational firms that are able to dodge their responsibilities. By ensuring that the 100 or so large multinationals on which this tax impacts pay their fair share in Britain, we can build an economy fit for the future, with thriving industries and good, secure jobs for all.

With a level playing field that is fair, our British businesses will succeed, thanks to the great quality of the goods they produce and the services they provide. The Government should be taking a lead on this once-in-a-generation opportunity. Our challenge to them is for them to seize this chance at a global deal that would bring billions of pounds into our country, stop British businesses that pay their fair share being undercut, and instead support them to thrive. That would be the fair approach that the British people expect their Government to follow.

Photo of Eleanor Laing Eleanor Laing Deputy Speaker and Chairman of Ways and Means, Chair, Standing Orders (Private Bills) Committee (Commons), Chair, Standing Orders (Private Bills) Committee (Commons) 6:00 pm, 24th May 2021

The House has become familiar with having a time limit for every item of business, but I hope that we can manage to consider this stage of the Bill without a time limit. I appeal to Members who are taking part to have consideration for other Members, and not to speak for too long. How long is too long? More than five minutes is too long, but if somebody takes five and a half minutes because they are making some important points, that would be fine. If the occasional person take interventions and it comes to six and a half minutes, that would be fine. But if people take longer than is necessary, I will have to impose a time limit, which makes for a less good debate. Let us try to behave like parliamentarians and not take too long. That puts a tremendous amount of pressure on Stephen Hammond.

Photo of Stephen Hammond Stephen Hammond Conservative, Wimbledon

Thank you, Madam Deputy Speaker. I am sure the House will benefit from your strictures towards my speech, and I welcome the opportunity to make a short contribution on the amendments. As James Murray rightly says, the OECD-Biden proposals are an attempt to ensure a multinational, legal framework to ensure that multinational countries pay tax in the countries from which they derive that revenue. Unlike him, I think any sensible look at history will show that this Government have led the way on this since 2010. There can be no suggestion that they have not led the way on ensuring that multinationals should not be able to shift profits to avoid taxation. They have tried to lead the arguments on securing, over many years, a multinational, multilateral agreement on where revenues and profits are derived and how those are taxed. Across the House, we ought to recognise that the Government have been trying to achieve that and that they support it. It has been true since 2010. One of the former Chancellors, George Osborne, led the way on the matter.

The OECD proposals, as the hon. Gentleman put it, are in two pillars, as we all recognise. Pillar one rightly seeks to address the matter of base erosion, as the UK Government have done historically and continue to do. Pillar two, however—I think he failed to recognise this point—would go well beyond what is normally considered to be within the ability of national states, in terms of using the flexibility of fiscal policy to ensure that investment and incentives are properly rewarded within their economies, and may well have some perverse effects on a number of multinational industries, such as the insurance industry. Given your strictures, Madam Deputy Speaker, I shall not give my long peroration on that matter.

However, the key point is that there is a difference between what the Government have been trying to achieve—a multilateral, multinational agreement on the need for a combined approach, which I have no doubt that the Prime Minister and the Chancellor will wish to speak about at the G7—and a legal, minimum international tax rate. It is right that Governments still retain the ability to set fiscal measures according to their economic circumstances. Therefore, I wholeheartedly support—as the Government do—the international agreed approach to ensure that we tax multinational companies on where they derive their revenues and profits.

The problem with new clause 23 is that it talks about a review of the impact of the global minimum tax, but in reality, it is superfluous, because many of the consequences of setting a tax rate of 21% can easily and readily be calculated. The OECD discussions on the precise nature of the agreement are still under review. Therefore, speculating about how that might assess and impact on different economies could hinder the global efforts to achieve that aim.

Finally, as I am sure the Financial Secretary will wish to assure the House, the Government have already agreed that as, when and if there is a global agreement on minimum taxation, they will—when they are a party to that—ensure that the Office for Budget Responsibility assesses the impact for the UK economy and globally. So while this new clause is an interesting amusement for the House tonight, it is superfluous and I wholeheartedly encourage the Government not to accept it.

The hon. Gentleman spoke a bit about the need for investment and for addressing the historical UK underperformance in that area. We all agree with that. As we seek economic recovery post-pandemic and, in the longer term, as we build a cleaner, greener and stronger economy, clearly, the problem of underinvestment has to be addressed on a long-term, sustainable basis. However, it is clear that what the Chancellor has done, with what is popularly known as a super deduction, is likely to bring forward investment in the economy at just the time it is needed. There is an element of saying that, of course, we want to concentrate that on any number of small businesses that may not benefit from investment relief and this may or may not be at the margin, but it may or may not be at the margin that it has the greatest impact. I think the super deduction, which the Opposition seek to criticise, will do exactly that. They want the OBR to assess the impact in other areas of the Finance Bill, but the OBR has already made an assessment of this particular measure in the Bill, which is that it will derive at least 10% extra investment in the UK economy. At this stage of our economic recovery, that seems to me to be fundamentally important, so I hope that the Government will push ahead with the super deduction, as they are doing in this Finance Bill, and even consider it on a longer-term basis as well, because it is hugely important that we address the under-investment in both physical and human capital. Therefore, Government amendment 2 to clause 9, which will allow leased buildings to qualify for that super deduction, seems to be eminently sensible.

Given your stricture, Madam Deputy Speaker, although I could share with the House another 15 minutes of brilliance, I shall now sit down.

Photo of Alison Thewliss Alison Thewliss Shadow SNP Spokesperson (Treasury)

I will also bear in mind what you have said, Madam Deputy Speaker, and keep my comments fairly brief.

I wish to start with the words of the US Treasury Secretary, Janet Yellen. She said:

“Competitiveness is about more than how US-headquartered companies fare against other companies in global merger and acquisition bids…It is about making sure that governments have stable tax systems that raise sufficient revenue to invest in essential public goods and respond to crises, and that all citizens fairly share the burden of financing government.”

That is something that this Government ought to be getting behind, as it makes absolute sense. It is exciting to see that the Biden plan for a global minimum corporation tax rate is gathering pace. It is reported that the G7 is close to a deal, perhaps paving the way for an OECD deal later on in the year. The action is described in the Financial Times as

“the largest shake-up in corporate taxation for a century.”

As the shadow Minister set out, the Government have been ducking questions on this and ducking responsibility. It feels to me at the moment that an agreement will take place in spite of the UK Government’s hesitancy—less global leadership, more like pulling teeth. Why would the UK Government be in favour of the types of profit shifting that this international co-operation is trying to stamp out? Why would they let our businesses be undercut? Why would they forgo valuable tax revenues?

Our new clause 12 is asking the UK Government to prepare a report on an OECD agreement, which seems very much like the direction of travel, as it would cover 135 countries and the largest corporations in the world. It is important that the UK Government fully understand the impact of such an agreement on each and every part of these islands: on business investment, employment productivity, GDP growth and poverty. The impact of not reaching a deal has been included in new clause 12, too, as it is important that we can fully understand the impact should the UK pursue some kind of crazy isolationist stance against this global growing consensus.

The SNP has great sympathy with new clause 22 and amendment 31. Those using tax havens and with a history of corporate tax avoidance should not seek to obtain benefit from schemes intended to support businesses that already pay their fair share. I ask Treasury Ministers what safeguards they intend to put in place if they do not accept these sensible and logical amendments.

I am glad that, in Government amendment 2, there is some recognition of the issues facing those who have background plant and machinery in leased properties, allowing them to qualify for the super deduction. I remain hugely frustrated that there is yet to be any wider support and any wider recognition of the many businesses both involved in leasing and those that lease machinery themselves. I seek assurances from Ministers that they will continue to hold the door open on this issue and to look at it, because there are so many companies that would benefit from the super deduction if it were not for the fact that they have always leased machinery. They contribute hugely to the productivity of this country and there should be some recognition of that within the Government’s proposals.

Photo of Margaret Hodge Margaret Hodge Labour, Barking

I wish to speak to amendment 31, which stands in my name and in the names of hon. and right hon. Members from across the House. I shall try to keep my comments brief, too. I will go back to first principles and try to convince Ministers that what we propose is simply fair, just and practical.

Eighty-five per cent. of the British public pay their tax without question through the pay-as-you-earn system. For many of those hard-working taxpayers really struggling to keep their families going, particularly after the pandemic, it is simply unconscionable to watch the big corporations that have made so much money during the pandemic—the Googles and the Amazons—continue to create financial structures that have no other purpose than to help them avoid paying corporation tax. Shifting their profits simply to avoid tax is not only unfair but utterly immoral.

I recognise that the Government have been trying to close the loopholes. That is why they introduced the diverted profits tax in 2015, which attempted to catch and tax the profits that global corporations make from the economic activity that they conduct here in the UK before those profits are shifted out of Britain to tax havens or low-tax jurisdictions. The tax, by definition, applies only to those multinationals that deliberately engage in artificial financial arrangements to avoid tax, so why on earth are we about to reward those very companies with what the Chancellor described as

“the biggest two-year business tax cut in modern British history”?

Our amendment would simply make the culprits of aggressive tax avoidance ineligible for the super deduction. How can Ministers object to this proposal? These companies refuse to contribute to the common pot, yet they are about to be gifted—by us, from that very same pot—a hugely generous tax relief. These companies need the public services that taxes buy, from improved connectivity to transport infrastructure; from the education of their workforce to investment in the NHS to keep their workers healthy. However, they persist in deliberately not paying their fair share of corporation tax. These companies can undercut and destroy our high streets and community businesses. They exploit the price advantage that they gain from avoiding the corporation tax that they should be paying, yet the Government are about to bestow on them the largest bonanza for big business in modern times.

We know that the diverted profits tax has not been a great success. Indeed, in this year’s Budget, the Chancellor sought to hide its failure by bucketing receipts from the tax together with the money received from betting and gaming and duties—evidence of the failure to secure moneys from these companies and ensure a level playing field between large and small businesses. Deliberately allowing tax-avoiding multinational corporations to benefit from this new £25 billion cash injection is unbelievably foolish. Not one of my constituents will understand why this Government are using their taxes to subsidise those who pay a pittance in corporation tax on the profits they earn here in the UK.

However, the lessons of the diverted profits tax go wider. They show that trying to solve an international problem through national action is hugely challenging. Time and again I have taken part in debates in which Ministers have responded to our calls for unilateral action by stating that the problem of taxing multinationals will only be properly addressed through international agreements. I have agreed with Ministers when they have argued that the best way of responding to the reality of global businesses whose business models are based on digital technologies is through new international tax treaties. I have urged our Ministers to demonstrate global leadership in this space through the G7, the G20 and the OECD, but it took one Joe Biden to provide the leadership, the courage and the imagination that we have all been crying out for. His proposed reforms would enable us to have an internationally agreed basis for reallocating global profits to national jurisdictions for the biggest companies, and would set a minimum global rate of corporation tax.

The UK should be a prominent voice, promoting this historic and game-changing set of proposals. We should be there welcoming these moves, which would at last deal with an injustice that offends us all. We should be leading the charge to ensure international support for the Biden proposals, and not be the ones who seem to be dragged kicking and screaming to the negotiating tables. Yes, the proposals need further thought. In particular, we should not agree a new set of international rules that benefit only the richer nations and leave developing countries disadvantaged and still unable to tax the profits earned in their jurisdictions. However, to find Britain plastered across the international press as the country that is preventing progress and thwarting agreement is truly shocking. Are the Government really pursuing the national interest, or are they simply defending the individual interests of a few giant global corporations and their immensely wealthy owners?

New clause 23, tabled by my right hon. and hon. Friends on the Front Bench, provides a timely opportunity for the Government to assert publicly that they are backing Biden. I am afraid that opposing the new clause provides clear evidence that they do not want this new deal and actually prefer to put the interests of the powerful multinationals above the interests of ordinary taxpayers. In practice, the slogan of building back better merely means building a tax system that rewards the rich and punishes the poor, that joins the race to the bottom on tax and that, in the end, will leave a legacy of a more divided and unequal society.

Tonight, I urge Ministers to back both amendment 31, tabled by the all-party parliamentary group on anti-corruption and responsible tax, which is pragmatic and would send out the right signals during these important international negotiations, and new clause 23, proposed by those on the Labour Front Bench, which place on the record in this House Britain’s support for groundbreaking new proposals that would herald an end to the outrageous tax behaviour of the biggest and most powerful global companies.

Photo of John Martin McDonnell John Martin McDonnell Labour, Hayes and Harlington 6:15 pm, 24th May 2021

I have to say that my right hon. Friend Dame Margaret Hodge has eloquently put forward the case for these proposals, both those from the Opposition Front Bench, which I fully support, and her own, but I think she has been too kind to the Government. Like her, I have sat for over two decades listening to the sophistry from Conservative Ministers explaining the various complications of doing anything to tackle tax avoidance, and they have been dragged kicking and screaming to take what little action there has been. I have also sat here year on year while they argued that cuts in corporation tax were the way to increase investment. Now, at least, they have admitted that they were wrong on that.

However, instead of cutting corporations’ taxes by cutting corporation tax, they are now simply doing it through the super deductions. These are super tax deductions to super tax avoiders. We can name them: Amazon, Vodafone, Virgin, Starbucks and many others. I sat in the Chamber when the global crash happened over a decade ago, and we discovered the intricate corporate structures that the banks used to avoid their taxes—the shell companies based in tax havens from the Channel Islands to the Caribbean. Barclays bank had more than 100 subsidiary companies located in the Cayman Islands alone. As these corporations became increasingly financialised, they became increasingly unprincipled about paying their dues to society.

I have tabled a simple amendment saying that super deductions should not go to companies that are failing to fulfil their duty as taxpayers in our country and that are using tax havens. The reason is simple: these corporations benefit from the workers they employ, and the taxes are needed to pay for their education and training. It is ironic that we are also often using our tax system to subsidise the low pay that these corporations pay their employees. They also benefit from the infrastructure. That is why they should be paying their way within our country itself.

In this struggle over the last 20 years or so, it is worth paying tribute to those who have campaigned so hard: my right hon. Friend the Member for Barking and all those activists, academics and journalists. I pay tribute to groups in the UK such as: Tax Justice Network; UK Uncut, which took direct action; Tax Justice UK; and those journalists and researchers who helped to expose the Panama papers and the Paradise papers. One of those journalists was the Maltese investigative journalist Daphne Caruana Galizia. She was assassinated in 2017 for the work she did to expose tax avoidance and money laundering.

My new clause 22 is very straightforward: no company should be eligible for the tax reliefs in the Bill if they are located, or have subsidiary companies located, in tax haven jurisdictions. The most authoritative list of tax havens or secrecy jurisdictions is the European Union’s blacklist of non-co-operative jurisdictions for tax purposes. That should be the basis of our approach. We are outside the EU now, so we must go further. Subsection (2) gives the Secretary of State powers to list additional jurisdictions that do not co-operate in disclosing information to Her Majesty’s Revenue and Customs. In this way at least we can ensure that we are not, in effect, acting as subsidisers for tax avoiders or laundering tax reliefs into their coffers. It is a simple amendment.

I support the Labour Front Bench amendments and the other amendments that would have a similar effect, but I have had enough. I am sick to death of sitting here listening to excuses from Ministers about failing to act when so much needs to be paid through a fair taxation system. So many of our constituents are having to endure continuing austerity because of the lack of tax revenues. They are living in poverty, unfortunately, as a result of the failure to have a fair taxation system that redistributes wealth in our country.

Photo of Danny Kruger Danny Kruger Conservative, Devizes

I rise with great enthusiasm for the proposals set out by the Government, in particular on the super deduction. We heard from my hon. Friend Stephen Hammond about the benefits that super deduction will bring to tax receipts eventually and to growth in the immediate term for our national finances.

I want to talk quickly about a benefit that will be felt locally in Devizes. I spoke today to the boss of Wadworth brewers, the brewers behind the legendary 6X and Bishop’s Tipple, with which you will be familiar, Madam Deputy Speaker. They are not tax avoiders, as John McDonnell just described them; they are local employers who drive growth and employment in my constituency. They will use the super deduction to invest in more buildings, more jobs, more brewing and more beer in Wiltshire, and I am absolutely delighted to welcome the proposal on their behalf.

There is a real problem that the super deduction proposal seeks to address, which is that, sadly, low corporation tax has not driven the sort of private sector investment we need. I therefore support the rise in corporation tax, which will be imposed on profits on the biggest firms. We live in a topsy-turvy world where we see Joe Biden proposing 15% corporation tax, the Labour party proposing 21%, and my Conservative Government proposing 25%. I recognise the value of that, however: we have to pay the bills of the pandemic somehow and I appreciate that this is the right way. We will still have the lowest corporation tax in the G7. That will make us, with the super deduction and the other measures that have been set out, the best country in the world in which to invest and to bring a business.

Let me finish by stating my support for the world-leading efforts the Government are making to ensure that big tech pays its fair share of tax. We have just heard from Dame Margaret Hodge that she thinks we should back Biden. I think we should back Britain. We should back what this country and this Government are doing to lead the debate on fair taxation. The key challenge for us is to ensure that the tax that is gathered through whatever global agreement we can make is paid in the right places; it would be a bit of a shame if we achieve a global minimum tax that was all paid in California. I welcome what the Government are doing, and I look forward to the Minister’s response and to the announcements that I hope will be forthcoming ahead of the Cornwall summit. I absolutely back everything the Government are doing through this Bill.

Photo of Christine Jardine Christine Jardine Liberal Democrat Spokesperson (International Trade), Liberal Democrat Spokesperson (Exiting the European Union), Liberal Democrat Spokesperson (Treasury) 6:30 pm, 24th May 2021

Again in this place, we are talking about the challenges that have been created by the coronavirus—the challenges to our businesses, to individuals and to those who have been excluded from Government support—and the taxation that will have to be used to try to rebuild. In the Finance Bill that the Government have laid before us, I believe that they have missed important opportunities to do that for the benefit of all our constituents. I would echo what James Murray said when laying out new clause 23 and when speaking about Biden’s proposals. We have to look at this crisis in a way that we have never approached any crisis before, and on a scale that we have never done with any crisis before. We have to look for measures that will be enacted on a scale that we have never seen before.

I would also like to express my support for the amendments tabled to address and, indeed, stop the malpractice that is rife. These include an amendment tabled following the inquiry by the all-party parliamentary loan charge group into how contracting should work, to stamp out the malpractice and mis-selling to public and private sector freelance and locum workers by unregulated umbrella companies. Those practices have created a climate where tax avoidance schemes are rife and are being mis-sold.

These amendments follow the powerful report by the loan charge APPG, as I have said. BBC Radio 4 has estimated the cost to the Treasury—£1 billion a year in lost tax revenue—and The Guardian has reported that the hidden cost of umbrella companies in the UK may actually be more than £4.5 billion a year. These are some of the opportunities that I believe the Government are missing.

There are also specific amendments before us tonight about measures that would require the Chancellor to review separately the effectiveness of furlough and the self-employment income support scheme, the impact of the Finance Bill on small businesses and the impact of the Bill on transitioning to zero-carbon domestic flights by 2030. All of these, I believe, are opportunities that the Government are failing to take.

The coronavirus has caused the worst economic crisis in three centuries and brought real hardship to our constituents up and down the country in all lines of work. The furlough scheme and SEISS have helped countless people so far, and millions continue to depend on them, but the Government need to think again and review their decision to end the schemes in September. They need to think about extending them into next year. We have all been glad to see cases dropping and restrictions being eased thanks to the vaccine and the NHS, but unfortunately this does not mean that the crisis is behind us.

Covid has left businesses saddled with debt and more vulnerable than ever, especially small businesses, and many are worried that they will not make it through the year. Their employees are rightly worried about their future. As experts warn us about the potential dangers of the new Indian variant, there are worries that the final step of the reopening road map might need to be delayed, or that we might not have seen the last of social distancing.

For all those reasons, it is essential to give workers, self-employed people and small businesses certainty about the future and keep job support in place at least until the end of the year. Even at this late stage, the Chancellor must correct the injustice against the 3 million excluded, who have spent more than a year with no help at all, by finally bringing them under the umbrella of Government support.

I would also like the Chancellor to review the impact of the Bill specifically on small businesses and whether it will offer them adequate help with their debt, rent arrears, solvency and ability to employ people. Small businesses are, as countless Prime Ministers have said, the backbone of our economy and the heart of our local communities. They create the jobs that we all rely on, with 16.8 million people working in small businesses and accounting for six out of 10 private sector jobs. Local shops, cafés, pubs, restaurants, hairdressers and florists all serve our communities and bring life to our town centres and high streets. If allowed not just to survive but to thrive, they can be the engines for growth and jobs in the months and years to come. At the moment, they are struggling under record amounts of debt and months of rent arrears; the collective debt burden is more than £100 billion. According to the Federation of Small Businesses, something like a quarter of a million of its members could close by the end of this year. On top of that, they have been badly hit by the terrible EU trade deal. That is why the Chancellor must adopt a revenue compensation scheme that could help those struggling with their finances and fixed expenses to stay afloat. At the very least, the Government should be undertaking a review to assess the state of UK small businesses and offer the necessary support off the back of that.

Opportunities are also being lost to transition to a zero-carbon economy by 2030. These are all opportunities with which this challenge of many lifetimes has presented us, and which we should seize in order to help individuals, businesses, families and communities up and down the country to recover. The opportunity was there with this Finance Bill, but I do not believe that the Government have grasped it in the way that they should. I ask them to reconsider and accept the amendments.

Photo of Anthony Browne Anthony Browne Conservative, South Cambridgeshire

I, too, will abide by your strictures, Madam Deputy Speaker, to keep my speech as short as possible.

When I was an economics correspondent a very, very long time ago, tax competition between countries was all the rage. There was a sort of mainstream consensus that it was a good thing because it helped give countries an incentive to be an attractive place to do business, but in the last couple of decades it has become clear how easy it is for international companies to run circles around national rules and reduce their tax bills by shifting profits to low-tax jurisdictions, and we end up with this outrageous, unconscionable position of some of the world’s largest companies paying some of the smallest corporation tax rates. That causes anger across the UK and on both sides of this House; we are all aligned in the objective of ensuring that big companies pay a fair share of tax.

This Government have been doing an awful lot, as James Murray recognised, to try to tackle this issue both within the UK and internationally, including through measures such as the diverted profits tax, the digital services tax and changes on tax to subsidiaries. When I was chief executive of the British Bankers Association, I was involved with a lot of the implementation of those rules.

We need to take measures internationally as well; this is an international problem, so ideally we need an international solution. The difficulty, though, is getting an agreement between a large number of different countries. Normally these sorts of discussions go through the OECD, which is so big that it is difficult to get agreement and progress is absolutely glacial. That is why, on things such as the digital services tax, the UK has opted to act unilaterally before an international agreement can be agreed. I very much welcome the fact that the initiative is now being led by the G7, because we are far more likely to get agreement from seven major countries, and then to expand that out to the G20 and then to the OECD.

As we have heard tonight, particularly from my hon. Friend Stephen Hammond, these are complex negotiations. There are two interlinked pillars at the OECD: the scope of the tax and the level of the tax if there is a global minimum rate of corporation tax. As my hon. Friend Danny Kruger said, there is no point in agreeing a global level of corporation tax if all we are doing is taxing companies in California; the two parts of the negotiations are intertwined. I very much welcome the fact that Government are involved in these negotiations. I completely respect that they may wish to negotiate more in private than in public, as that is often the best way; I know that their intentions are absolutely right.

That brings me to new clause 23. It is the wrong review at the wrong time. The new clause asks the Government to review the corporation tax set at 21%, but, as the hon. Member for Ealing North said, it actually looks like Joe Biden and the US are now looking at 15%, so this proposal is already out of date and it has not even been voted on yet. It is also at the wrong time because what we do not want to do in the middle of an international negotiation is tie our hands, display all our cards and show what we are doing. It could create a dynamic in the negotiations that would actually set back the UK’s ambition to ensure that companies pay a fair rate of tax. I therefore fully support the Government in rejecting the new clause. I also fully support them on reaching a strong global agreement to ensure that the world’s biggest companies pay their fair share of tax.

I hope that that was less than five minutes.

Photo of Dan Carden Dan Carden Labour, Liverpool, Walton

It is great to follow so many passionate and powerful speeches from my own side of the House in this debate. I am perplexed at the situation Ministers have got themselves into, seemingly exposed by the US President on their real agenda on taxation. In the last year, the pandemic has not just shone a light on the deep inequalities in our society; it has driven and deepened those inequalities like never before. Millions of people have been plunged into insecurity while a small number of the very richest have seen their fortunes surge, with 24 new billionaires in the last year, despite everything else that has been going on. Key workers have put their health and lives on the line for the benefit of others to ensure that their neighbours were fed, people were treated when they were sick and society kept moving, while some bosses at companies such as British Gas and British Airways used the pandemic cynically to drive down pay and terms and conditions through shameful fire and rehire tactics, and all the while the Government have stood by and done nothing. While millions were excluded from Government support and then ignored, if you knew Ministers or had donated to the Tory party, there were billions of pounds of public money in lucrative contracts, handed out without competition or transparency.

So if the Finance Bill was an opportunity to fix a rigged system that was failing communities up and down the country, the track record of this Government tells you that they are incapable of taking that opportunity. The decades-long race to the bottom on corporation tax may finally be coming to an end with the proposal to raise the headline rate in 2023, but alongside it measures in this Bill will do more harm than good when it comes to fair taxation and plugging the hole in the nation’s finances. As we have heard, the super deduction is a £25 billion giveaway to big business. TaxWatch calls it “The Amazon Tax-Cut” because it could entirely wipe out the UK corporate tax bill of Amazon UK Services Ltd. The Times reports that it will allow companies to write off investments in swimming pools, interior decoration and Jacuzzis against their tax bills.

Ministers just are not serious about making tech giants pay their fair share of tax. In fact, Ministers are now rowing back on key commitments they made to tax transparency. Since 2016, the UK has had the power to lift the lid on multinational company accounts through country-by-country reporting, but it is clear that the Government have reversed their original commitment to do so. Instead Ministers are now actively blocking the OECD from publishing the data at an international level, signalling what the Tax Justice Network called a dangerous “regression into tax havenry”.

The UK has been moving in the wrong direction, backing secrecy over transparency, tax havens over progressive taxation and multinational corporations over small and medium-sized UK businesses. That is an agenda that no doubt delighted President Trump, but the election of President Biden now means that the US has done an about turn, and it is time Ministers caught up.

The US is now leading on international tax reforms that the UK has been sabotaging for years—tax reforms that would stop multinationals hiding profits overseas and establish a global minimum tax rate of up to 21%. These are reforms that would raise billions from tech giants and stop Amazon, Apple, Google, Alphabet and Facebook from shifting their profits from the country they were made in to tax havens. While every other G7 country has responded positively to President Biden’s plan, the UK Government continue to block the best opportunity in a generation to curb corporate tax abuse.

The Government, no doubt emboldened by the Trump regime, have been on the wrong side of tax transparency and tax reform for a number of years, but the pandemic has exposed the grave cost of an economic system that prioritises the interests of corporate giants over people and local communities, because wealth does not trickle down—it never has. Rather, it is sucked up, away from those who do the work and who contribute to society, and towards those who set the rules, reap the rewards and, all too often, avoid paying their fair share. That should change now.

Photo of Miriam Cates Miriam Cates Conservative, Penistone and Stocksbridge 6:45 pm, 24th May 2021

It is a pleasure to speak on Report of the Finance Bill. Over the past 14 months, the Government’s main concern has been to protect the UK from the worst impacts of the global pandemic. We have seen a comprehensive public health response to slow the spread of coronavirus, and more recently to deliver mass vaccinations on an unprecedented scale, but the Government have also delivered a comprehensive financial response to secure jobs and livelihoods, and to protect the economy. This response has been hugely successful and the most recent Office for Budget Responsibility forecast suggests that the UK economy will recover six months earlier than previously thought. However, essential though this financial response has been, it has cost the taxpayer £407 billion, the majority of which has been debt. This year, we have borrowed a staggering 17% of GDP.

As we emerge from the pandemic, it is imperative that we begin to plan how that debt will be repaid and the deficit reduced. One of the tools at our disposal is to raise levels of taxation, and it is right that any increases should fall on the broadest shoulders. While many small and medium-sized enterprises in my constituency have struggled this year, some of the UK’s biggest businesses have made significant profits. It is only large, often international, companies with profits of over a quarter of a million pounds a year that will be required to pay the highest rate of corporation tax, as stipulated by clause 6.

It is not only the UK that is reconsidering business taxation. Current global efforts to update corporation tax frameworks in response to modern challenges are ongoing, and we have seen reports today of those international negotiations and the positive steps that are being taken to address the current practice by some multinational companies of shifting profits to low-tax jurisdictions. I absolutely support the efforts to end that practice, but I oppose new clause 23, which would compel the Government to publish, within six months of enactment, a review of the impact on corporation taxation revenues of a global minimum rate. Since those matters are still subject to international negotiation, any assessments mandated by the new clause would be purely speculative and a complete waste of resources.

Taxation is not a penalty and should not be an ideology. It is a tool—a mechanism that we can use to ensure that the state can afford to pay for the infrastructure and services that citizens expect. Taxation levels must balance the requirements of those services with the rights of individuals and businesses to have as much agency as possible over their own financial resources. There is no absolute right or wrong level of taxation. Tax rates should change with the times and challenges we face.

The Opposition have spent the past year calling for more taxpayers’ money to be spent on supporting businesses, welfare and health, and they have often rightly framed that demand in moral terms, highlighting the impact of the pandemic on those who have been hardest hit. But all resources are limited, even the state’s. Just as public spending has a moral dimension, so does public debt. It is morally wrong to leave difficult decisions for future generations, rack up eye-watering interest payments for our children and grandchildren, and risk the security of our economy. That is why we must have a plan for reducing our debts. Increasing corporation tax for the largest businesses is an important part of that.

I said that taxation policy is a tool—a mechanism for raising money—but it can also be a catalyst for growth and investment. With the introduction of the super deduction and freeports, which will be discussed when we debate the next group of amendments, I am confident that, unamended, this Finance Bill will kick-start our recovery and help businesses across the country to build back better.

Photo of Zarah Sultana Zarah Sultana Labour, Coventry South

I remember when the pandemic first hit and the Chancellor said that we would all be in it together. Well, the reality has not turned out that way. It has been the story of the many and the few. For the many, it has meant food bank use rocketing—it is up 33% on a year ago. Universal credit claimants have doubled in my constituency and child poverty now affects more than one in three children in Coventry South—nearly 7,000 kids in my constituency alone—and nearly 4.5 million across the country.

While the majority have struggled with falling wages, unemployment and rents that they cannot afford, for a wealthy few it has been a bonanza. Last week The Sunday Times rich list revealed a record growth in UK billionaires, of whom there are now 171 in total. Their wealth stands at £600 billion—up nearly 25%. Amazon, which this year has raked in record revenues of £38 billion across Europe, paid nothing in corporation tax. This is not just a broken economic model—it is not just unfair and unequal—it is rigged. It is redistribution, but not in the way that we might traditionally understand: it is taking from the many and giving it to the few. That is what is happening when we see that food bank use is up 35% and billionaire wealth is up 25%. This Conservative Government not only refuse to tackle that but aid and abet it.

There is nothing in the Bill to tackle the tax loophole that means that income earned through wealth, owned overwhelmingly by the rich, is taxed at a lower rate than income earned through work. There is nothing in the Bill to fairly tax the obscene profit that companies such as Amazon have made during the pandemic, with the Government refusing to embrace a windfall tax. There is nothing in the Bill to provide the necessary investment in Her Majesty’s Revenue and Customs to tackle tax avoidance and evasion by the super-rich and big businesses. Instead, the Government are standing by as the tax gap stands in excess of £35 billion.

What is in the Bill is £15 billion more in annual cuts to Government Departments and a super deduction tax cut in capital spending that the rich are already reported to be using to purchase jacuzzis. To top it all off, there is the Tory Government’s refusal to embrace plans to tackle global tax avoidance. The plans put forward by the US could prevent the likes of Amazon, Google and Facebook from dodging tax and refusing to pay their fair share, and end the race to the bottom on corporate tax rates. Even at a moderate rate of 21%, such a measure could raise £13.5 billion for the UK Treasury, according to Tax Justice UK.

We should not really be surprised by the Government as they are on the side of big business and the super-rich. For a decade they have been cutting taxes while cutting the budgets of schools and hospitals throughout the country. They are also funded by a third of UK billionaires and, of course, they are led by the super-rich, too—not just an old Etonian Prime Minister who complains that his £150,000 salary is not enough, but a Chancellor who went from an elite private school to Oxford to investment banking, before becoming the wealthiest Member of Parliament in this House and using his power to cut the services of the working class.

Instead of this rigged and rotten system, we could make the super-rich pay their fair share to fund our public services and end poverty for all. That is the least the Government should be doing, so they should back the plan for a global minimum corporation tax. They should also back my proposed new clause, which would shine a light on the scandal of tax dodging. Instead of entrenching inequality, the Government could be building an economy for all.

Photo of Richard Thomson Richard Thomson Shadow SNP Deputy Spokesperson (Treasury - Financial Secretary), Shadow SNP Spokesperson (Wales), Shadow SNP Spokesperson (Northern Ireland)

I rise to speak in favour of new clause 12, which was tabled in my name and those of my Scottish National party colleagues.

We have previously welcomed the planned future increase to the corporation tax rate and we also very much welcome, as have other speakers in the debate, the news reported today in the Financial Times that the G7 nations, or at least some of them, seem to be close to an agreement on minimum rates of corporate taxation. Like other speakers, I take this opportunity to praise and put on the record my admiration for the Biden Administration for having brought the situation about. It is imperative that the UK Government rise to the moment and seize the opportunity to embrace the emerging consensus on global taxation and ending the race to the bottom on corporate tax rates. For a global minimum tax rate for companies will reduce the opportunities for companies to minimise their tax liabilities by funnelling revenues through other jurisdictions. That will help to ensure that more tax gets paid in the jurisdictions where those revenues have been earned. In the process, that helps to uphold living standards and ensure that a fair contribution is paid to the common good by our corporate citizens for the public goods they consume.

New clause 12 follows our efforts at previous stages of the Bill’s progress in trying to oblige the Government to review the impact of the proposed corporation tax changes on all parts of the UK in respect of investment, employment, productivity, GDP growth and poverty, and to compare the difference between actual and forecast outcomes in the event of a deal with other OECD countries on a minimum level of corporation tax, such as I have mentioned, and in the event that such a deal cannot be reached. I also find much to support in new clause 22, as well as amendments 30 and 31.

Frankly, it should be taken as a given that any company qualifying for tax reliefs should be domiciled in the tax jurisdiction offering those reliefs. It should have an exemplary history when it comes to paying taxes that are due on its activities in that jurisdiction and an exemplary record of behaviour towards its employees, in terms of recognising the right to organise their labour and paying a living wage for that labour.

To conclude, in difficult times or in better times, there is nothing that sticks in the collective craw more than large corporate entities that seek to take almost as much from society as they give in return, and which pay much less than they are able and often end up paying proportionately far less than many of their smaller competitors. I am very happy to support these amendments.

Photo of Kate Osborne Kate Osborne Labour, Jarrow

In March, the Government had the opportunity to set out a plan to build a fairer, healthier, greener Britain. Instead, the Chancellor has chosen to continue down the path of further inequality and insecurity by writing off the tax liabilities of huge multinationals such as Amazon and Google. These big tech firms have made huge profits during the pandemic, and now the Government are enabling them to hide their money from the very people who have sustained them.

The Chancellor’s super deduction incentive is not the innovative idea that he might like to portray it as. The Government’s plan to rapidly increase corporation tax after many years of cutting it means that the super deduction is an incentive to prevent businesses from pushing investment to the end of the period. It will make no difference to investment in the long run. All it does is change when businesses will decide to invest, rather than encouraging them to invest more. The super deduction is not targeted at British businesses that have been struggling. It is targeted at multinationals such as Amazon and Google, which will be able to use it to write off their entire remaining UK tax bill.

The Treasury will lose tens of billions through this tax cut, which makes even more confusing its argument that it has not been possible to find the smaller sums required to give our NHS workers a well-deserved pay rise. It is essential that the income from wealth is taxed at the same level as income from work, and that multinationals such as Amazon are forced to redistribute their huge profits into our communities by paying their fair share of tax. Multinationals paying their tax does not just result in more spending on our public services; it also means that British firms that pay tax here will not be undercut by companies such as Amazon, which can shift profits overseas to take advantage of very low rates of corporation tax elsewhere.

The online shopping boom that sprung from the covid lockdowns has led to Amazon creating more than 1,300 jobs in Gateshead. While job creation in my constituency is welcome, shocking employment practices have been reported at Amazon fulfilment centres in the UK and across the globe. Do the Government really believe that all large corporations should be entitled to tax breaks, regardless of how well or how badly they treat their employees? I join Unite the union in demanding that workers at Amazon have the right to join a trade union without fear of reprisal.

Nothing angers the British public more than multinationals such as Amazon and Google and others paying ultra-low levels of tax. If the Government were serious about their levelling-up agenda, I am sure they would be happy to support new clause 22, which would prevent subsidiary companies registered in tax havens from benefiting from UK tax relief, and new clause 31, which would prevent multinational corporations with a history of corporate tax avoidance from benefiting from the super deductions in the Bill.

After a year in which many big tech firms have done well, we need to do better and move beyond our outdated global tax system. That is why I state my support for new clause 23 and new clause 6, which follow the Biden Administration’s call for the introduction of a global minimum rate of corporation tax. The new clauses specify a minimum rate of 21% over the next two years, rising to 25% in 2023. Tax Justice UK estimates that if the rate was set at 21%, approximately £13.5 billion each year would come back to Britain. A globally set minimum rate of corporation tax would not just mean more money being made available to fund our public services; it would also prevent countries from undercutting each other and depriving themselves of tax revenues at a time when every country needs to repair its economy. A universal minimum rate of corporation tax would also bring an end to tax havens and avoidance more widely.

The UK is hosting the G7 meeting in June. As it stands, the UK Government are the only one among the G7 who are unwilling to challenge global corporation tax avoidance. How can they justify that when our country needs all the money it can get right now and when decent British businesses are being undercut by competitors paying 0% in tax havens such as the Cayman Islands? Now is the time when our Government should be taking the lead in supporting the plans for a global minimum corporation tax so that we can build an economy fit for the future, with thriving industries and good, secure jobs for all.

Photo of Claudia Webbe Claudia Webbe Independent, Leicester East 7:00 pm, 24th May 2021

When we look at our world today—a world in which half of global wealth belongs to the richest 1%, a world in which large corporations possess more financial power than many post-colonial countries, and a world in which British Amazon warehouse workers earn in eight weeks what the company’s chief executive makes in one second—it is clear that we need to radically reassess how we tax large corporations.

It is therefore shameful, as my hon. Friend James Murray made clear, that the British Government are the only G7 Government not to support US President Biden’s plans to halt the race to the bottom on corporation tax. However, I do not believe that even these plans for a global minimum rate of corporation tax for large multinationals go nearly far enough. We should be much, much bolder than the 15% or 20% threshold that is being discussed. After all, we are talking about corporations that have made super profits out of this pandemic and are paying low wages to our workers. The fact that our Government are not even willing to engage with this most basic of proposals reveals how unserious they are about reining in the rampantly unequal power of large corporations.

We know that tech giants currently pay a negligible amount of tax. A report by Fair Tax Mark found that for the Silicon six of Facebook, Apple, Amazon, Netflix, Google and Microsoft, the gap between the expected headline rates of tax and the actual tax paid between 2010 and 2019 was $123 billion. This is as unsustainable as it is unjust.

It is important to bear in mind that billionaires exist when and where workers are exploited, as has been cruelly demonstrated by the testimony of Amazon workers who have bravely and painfully disclosed the conditions under which they are forced to work. Rather than blocking international efforts to address this crisis, the Government must properly tax large corporations and invest to build a radically fairer country. That means not only rejoining the international plan led by President Biden but making the case that the minimum threshold be increased. It is important to remember that in the period post world war two, the top rate of corporation tax was actually as high as 52% for large companies—this, after all, was introduced by a Conservative Chancellor—but in the 1980s it was reduced to 30%. Since 2010, the Conservatives have cut corporation tax from 28% to 19%—by more than most among relatively rich countries. This shows that they would rather raise funds by squeezing the British people than reduce the corporate profits of wealthy shareholders.

The super deduction is wasteful and open to abuse. Are we going to see, as has been reported by The Times and others, tax breaks handed out for investing in swimming pools and jacuzzis as opposed to targeting support at British businesses that have been struggling during the pandemic, or even as opposed to targeting investment to end child poverty? Currently one in two children in my constituency are living in poverty—that is 42% of children who could be saved. Child poverty is a political choice, and this Bill is the proof of that. Are we going to see this measure as opposed to targeting investment to end the starvation wage that workers in Leicester’s garment industry receive while making clothes to fund the super-bonuses of retail brands such as Boohoo and others? Quite simply, the super deduction will allow multinationals such as Amazon to write off their tax liabilities.

As we recover from the coronavirus, we must learn the lessons from the 2008 financial crash. The 99%—the many—must never again be forced to bail out the super-rich. The Government must recognise that in our country of deep and unequal wealth, the ultra-rich and large corporations should be asked to contribute their fair share. Corporation tax is a tax on profits, not people. Cutting it means more profits in the pockets of wealthy shareholders and less in those of nurses and other essential frontline workers. To enable much-needed investment, an increased tax on company profits is necessary and long overdue, and it should be raised above the Government’s 25% limit, which is still the lowest of the G7 countries. Above all, it is vital that we enter the debate around taxing the super, ultra-rich and large corporations with much more ambition, as it is one of the most powerful weapons in the Government’s arsenal to combat the rampant inequality that defines our era.

Photo of Jim Shannon Jim Shannon Shadow DUP Spokesperson (Human Rights), Shadow DUP Spokesperson (Health)

I am grateful for the opportunity to highlight a number of issues during the Report stage of the Finance Bill. I am always pleased to see the Minister in his place and I hope that I can put forward some points to which he will be able to reply.

I want to refer to clause 6, in part 1. I have spoken on this issue on numerous occasions, and I am thankful for the clarification the Government have sought to provide. However, I am still left disappointed at the rationale as regards corporation tax. Claudia Webbe referred to this as well. The measure sets the charge for the main rate of corporation tax at 19% for the financial years beginning 1 April 2022 and 1 April 2023. These changes mean that from 1 April 2023 the main rate of corporation tax for non-ring-fenced profits will be increased to 25%, applying to profits over £250,000. A small profits rate will also be introduced for companies with profits of £50,000 or less, so they will continue to pay corporation tax at 19%. Companies with profits between £50,000 and £350,000 will pay tax at the main rate, reduced by a marginal relief providing a gradual increase in the effective corporation tax rate.

The impact assessment that the Government have produced highlights the issue that I want to speak about. It states that there is no impact on families, but goes on to say:

“However, if businesses struggle or are unable to pay increased Corporation Tax, this could impact on their family formation, stability or breakdown. To support, HMRC can provide a Time To Pay arrangement.”

The issue is clear, at least in my mind and, I suspect, in the mind of many others: businesses have already struggled. While rates and wages may have been paid, and we are grateful for those schemes, the fact is that many small businesses have still had to pay out rent for equipment that they were precluded from using to make a profit, so their income was massively affected and many people’s personal savings were totally wiped out. They then took out a coronavirus business interruption loan to help them to make it through. We are beginning to come to the other side—thank the Lord for that—where they are seeking to rebuild, but instead of a meaningful reduction, there is merely a stay of execution with corporation tax.

That will affect many businesses and, by extension, many homes and families. It seems that it could well mean the end of many of our small businesses; while that is sad on a personal level, it is devastating on an economic level. We must remember that small and medium-sized businesses are the backbone of our economy. The Financial Secretary and his Conservative Government have been committed to helping small businesses. All those small and medium-sized businesses are the backbone of the whole United Kingdom—they certainly are in my constituency of Strangford.

I repeat what I have said before in this Chamber: there is no point in carrying businesses thus far, only to allow them to flounder now before any repayment is made. The Government have admitted that there will be a reduced incentive to incorporate businesses that would usually seek to take this step. All this has an effect on the long-term income to our economy. I know that the Government want a stronger economy; we all do, and I believe that we need some help.

Northern Ireland is well placed to be a central hub for business. We have much to offer, yet people can go south of the border to lower corporation tax and greater incentives. Along with my colleagues in the Democratic Unionist party, I have often argued for a reduction in corporation tax to attract businesses to Northern Ireland. I believe that the corporation tax rate repels investors, so I urge the Financial Secretary to look at the issue again. I understand that historically he has wanted a UK-wide rate of corporation tax. However, I want a UK-wide customs market, and that is not the case—ask the local small grocer who cannot even get in dog treats to sell because of the Northern Ireland protocol. There are differences made by this insidious protocol that affect our corporations and small businesses alike. It is clear that if the Financial Secretary insists on one size fits all, it must be applied in every aspect of manufacture, delivery and retail.

The Northern Ireland Assembly is establishing a working group on the consequences of creating our own corporation tax band and its effect on our block grant; maybe the Financial Secretary could highlight where those discussions have taken us so far. I believe that there is an opportunity for him to step in and do the right thing for the UK with a view to the long term. That is what I am requesting, even at this very late stage.

The UK is stronger together. I believe that the United Kingdom of Great Britain and Northern Ireland will always be stronger together. That has become the mantra of our Government, and I agree with it, but it needs to be more than words: action must follow the words and show our strengths. I believe that a reasonable rate of corporation tax across the board is a step to strengthen the Union, not cause more division.

Photo of Jesse Norman Jesse Norman The Financial Secretary to the Treasury

I am grateful to all Members who have taken part in this debate. Let me pick up on several issues that have been raised, starting with the super deduction. You will be aware, Madam Deputy Speaker, as I think some Opposition Members are not, that it has been described by the CBI as

“a real catalyst for firms”, while the British Chambers of Commerce said:

“We particularly welcome the massive ‘super deduction’ investment incentive.”

They are absolutely right. It is a terrible shame that the Labour party has decided to try to tarnish the super deduction, a measure from which many capital-intensive businesses around this country will benefit, especially in the north, the north-west, the north-east and the midlands. As my hon. Friend Danny Kruger rightly picked up, it is a measure that benefits local businesses up and down the UK. He picked Wadworth, a well-known brewer, and rightly so, but there are many, many other businesses for which that is also true. He was absolutely right to highlight that.

Let me come on to questions of wider taxation, if I may. There seems to be an astonishing level of ignorance among Members on the Opposition Benches. They seemed to be unaware that the tax gap—the difference between the amount of tax actually collected and the amount of tax that could potentially be collected—is at its lowest rate in our recorded history, at 4.7%. It may be of some interest if I point out to them—they can reflect on this—that in 2005-06 under the Labour Government it was 7.5%, so it has fallen dramatically, I am pleased to say. Tax that was not being collected by the Labour Government at that time is now being collected by the Conservative Government of the present day, and a very good thing that is too. That is a record on which they should spend some time pondering. The fact of the matter is that this Government have always made it plain that they will be very tough—as tough as they can be—in order to collect the tax that is due and to make sure that corporations and individuals pay it wherever they are due to.

Let me come on to the question of the G7, which was raised by James Murray and others. We have always made it plain, and we have stated in public, in this Chamber and in public communications, that this Government support both parts of the OECD proposals—the proposals for pillar 1 and pillar 2—and it is important to be clear about that.

Opposition Members quoted the recent Financial Times article. I remind them that it says that

“the US proposals have now opened up room for a compromise...This is a good start.

I also pick up the point mentioned by my hon. Friend Anthony Browne, who said that we do not always discuss everything we want to when negotiations are under way, which they presently are. As the FT says, this

“is a good start. It is essential now to reach a satisfactory agreement.”

When the hon. Member for Ealing North speaks, he might care to tell us whether, if a deal is agreed with the US according to the proposals that have been put forward and that are being shared and discussed at the moment, the Labour party will welcome what could be one of the landmark moments in global corporate taxation.

That is what we are doing, and in doing it we are merely following a tradition and a pattern of leadership that this Government have exercised over many years, so let me just pick up some examples. We have seen leadership on base erosion and profit shifting; leadership in the G20 on a comprehensive global solution based on the two pillars we have described; leadership, now, in our presidency of the G7; before that, the diverted profits tax, the corporate interest tax restrictions and the requirements for large businesses to publish their tax strategy; even last year, the digital services tax; and, in the present Bill, a plastic packaging tax. We are constantly innovating to seek to improve the quality and payment of taxation and to ensure that tax is paid in the due amounts by those who are due to do so. That is what this Bill does, and that is why I commend these measures to the House.

Photo of James Murray James Murray Shadow Financial Secretary (Treasury) 7:15 pm, 24th May 2021

I thank so many Members for their contributions to this debate, which has focused on the importance of fairness in the tax system, supporting British businesses and the need for the Government to step up and help to strike a global deal to stop tax avoidance.

We heard from my right hon. Friend Dame Margaret Hodge, who spoke with great experience about how the UK should be a prominent voice leading the charge to support President Biden’s proposals. She said that deliberately allowing tax-avoiding large multinationals to benefit from the super deductions is unbelievably foolish. My right hon. Friend John McDonnell spoke about the unfairness of certain firms getting a super deduction. We also heard passionate contributions from my hon. Friends the Members for Liverpool, Walton (Dan Carden), for Coventry South (Zarah Sultana), for Jarrow (Kate Osborne) and for Leicester East (Claudia Webbe) about their and the public’s disbelief that the UK appears to be blocking the best opportunity in a generation to strike a deal on global tax avoidance, especially with the UK hosting the G7 summit in June.

We also heard from Conservative Members. Anthony Browne seemed rather eager to welcome the fall from 21% to 15% as a minimum, rather than wanting to help the US Treasury, which has publicly said that “15% is a floor” and that we

“should continue to be ambitious and push that rate higher.”

Danny Kruger spoke about backing Biden and backing Britain. That is what our approach seeks to do. His Ministers are backing Bermuda.

Unfortunately, the Minister gave no reassurance in his speech that the Government are committed to taking a lead on this once-in-a-generation opportunity for a global deal on tax avoidance by a few large multinational firms that undermine British businesses and fail to pay their fair share. We were hoping that, today, the Government might finally indicate their support for President Biden’s plans, but instead we heard more of the same nonsensical justification for inaction. Through the vote on our new clause, we will push them to review and be transparent about the impact that a global minimum corporate tax rate no lower than 21% would have.

We were also hoping that the Minister might have indicated his support for our very simple amendment that would stop Amazon and a few other tech giants from benefiting from the tax break that the Chancellor announced at the Budget. He and his colleagues failed to address that point, so we will seek a vote on that amendment to see if any Conservative Back Benchers feel uneasy at their Ministers effectively finishing the job that Amazon started, wiping out the last bit of tax that Amazon would have to pay on the few parts of their business whose profits they have been unable to shift overseas.

This debate has exposed the failure of this Bill and this Government to be on the side of the British people and of British businesses trying to get back on their feet. Ministers have resisted stepping up to the challenge of stopping a few large multinational firms that are not paying their fair share of tax. We urge any Government Members who are uncomfortable with the position that their Government are taking to join us in voting for new clause 23 and amendment 29.

Question put¸ That the clause be read a Second time.

Division number 6 Finance Bill — New Clause 23 - Review of impact of a global minimum rate of corporation tax

Aye: 261 MPs

No: 364 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

The House divided: Ayes 261, Noes 364.

Question accordingly negatived.

The list of Members currently certified as eligible for a proxy vote, and of the Members nominated as their proxy, is published at the end of today’s debates.