Global Minimum Corporate Tax Rate

Debate between Lord Agnew of Oulton and Lord Hannan of Kingsclere

Wednesday 14th April 2021 Lords Chamber

[Lord Agnew of Oulton (Con)]

The overriding position is that we welcome the American Government’s re-engagement in this process. As realists, we accept it will not happen without full American support. We agree with the noble Baroness that these things hang together, and it will be a cohesive result that will work.

[Lord Hannan of Kingsclere (Con)]

My Lords, international tax competition is an important constraint on big government. You can raise the rate only to a certain point before the revenue and jobs begin to flee to friendlier jurisdictions. For that reason, it has always chafed with people who want a very large state. Will the Minister accept that the logic of the Laffer curve is not an academic theory but an empirically observable reality—that every cut in corporation tax, down to our current rate in this country, led to an increase in revenue? Will he further accept that having a competitive rate of corporation tax is an important growth strategy for a developing country? The formula that worked for Singapore, Hong Kong and eastern European countries would be cut off if we created a global high-tax cartel.

[Lord Agnew of Oulton (Con)]

My Lords, we did not plan to increase corporation tax in the way we have had to do in the last few months. It is only as a result of the appalling crisis we have suffered through Covid and having to address the financial impact of that. I agree with my noble friend that lower corporation tax rates are broadly a good thing. Personally, I do not like to see tax on productive activity, employment or any of the things that make a country prosperous. Therefore, I support his comments that we should always aspire to lower tax rates, particularly on corporation tax. We will try to set it still at a competitive rate, so the US, Canada, Korea, Japan and Germany will all have higher rates than the one to which we are moving.