Corporate Tax Avoidance

Baroness Primarolo Excerpts

Monday 7th January 2013 Commons Chamber

[Madam Deputy Speaker (Dawn Primarolo)]

Before I call Mr Ian Swales to move the motion, may I inform Members that 17 Back Benchers are hoping to participate in the debate, so if each one aims to speak for less than 10 minutes, there will not be a need for a time limit? If that does not happen, a time limit will be imposed and it will probably be less than 10 minutes.

--- Later in debate ---

[Several hon. Members]

rose—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. It is necessary to have a time limit in the debate as more Members are standing to indicate that they wish to participate. The time limit will therefore be eight minutes per Back-Bench contribution, starting from the next speaker.

--- Later in debate ---

[Mr Meacher]

The right hon. Gentleman, whom I respect, wishes to raise a partisan issue when we are discussing something of much greater importance. Perhaps I can satisfy him by saying that I entirely agree with him. New Labour was just as bad as the Tories and I fully recognise that, but let us turn to where we are and what we ought to do about it.

The third question is this: if the Government are serious about tackling tax avoidance, why are they cutting the number of tax inspectors, many of whom recover more than 100 times the cost of their salary? In 2010 there were 68,000 of them. There are now far fewer. The problem is that when the Chancellor gives his dog-whistle that Britain is open for business, part of that coded message is that Britain is open for tax avoidance, and there will be far fewer tax inspectors nosing about and prying into shady practices.

While the Government have ostentatiously avoided all the actions that will end the transfer of tax avoidance, the truth is even worse. They are now drawing up measures which, frankly, will rip the guts out of the laws that safeguard the nation’s corporate tax base. They have exempted from tax multinationals’ foreign profits, but allow tax relief for the costs of funding them. In effect, that turns the UK itself into a corporate tax haven, which incentivises multinationals to shelter income offshore and to place real business overseas, using the UK as a worldwide platform for tax avoidance.

The Government are now going even further with the CFC—controlled foreign companies—rules. From January 2014, multinationals that open a finance subsidiary in a tax haven will have their corporation tax, as staggering as it may seem, reduced from the current 23% to 5.5%. In future, therefore, multinational companies really need not bother with tax avoidance any more, because the Government are serving it up to them on a plate.

The latest wheeze that the Government have come up with is the patent box. If a company has a product with a small patented component, it will qualify for a 50% cut in its corporation tax—that is 10% from April 2017—not only on that product but on the whole of its profits.

A third example is the general anti-avoidance rule, which the Government portray as their flagship measure against tax avoidance. Actually, it is the reverse. By being narrowly drawn it will block the worst kinds of tax avoidance, but by the same token—

[Madam Deputy Speaker (Dawn Primarolo)]

Order.