Finance Bill

Bob Stewart Excerpts

Tuesday 28th June 2016 Commons Chamber

[Sammy Wilson]

I was about to say, Mr Howarth, that the reduction in corporation tax will be an additional means by which we can capitalise on those opportunities.

[Bob Stewart (Beckenham) (Con)]

Would the hon. Gentleman like to see corporation tax in Northern Ireland at the same level as in the Republic of Ireland? Would that be possible?

[Sammy Wilson]

I have two more points that I want to make. The first is that the reduction in corporation tax in this Budget gives the Northern Ireland Government more flexibility. I hope the Minister will be able to clarify how much this reduction in corporation tax will reduce the bill for the devolution of corporation tax to the Northern Ireland Assembly. The reduction of that bill enables the Northern Ireland Government to do one of two things: either to have a lower cost for the reduction—the 12.5% —or to reduce the rate below 12.5%, accepting that there will be a hit of £280 million. If that has already been factored into the Budget, the rate of corporation tax can be reduced even further to make us more competitive.

Lastly, if the Government had decided not to go down the route of lowering the headline rate, one way of giving incentives to firms would simply be to increase the number of capital allowances or make them more complex. Although it could be argued that that would allow the Government to target particular kinds of investment, it has two impacts. First, it increases the cost of collecting tax, and, secondly, it makes it more complex for firms to have their corporation tax calculated. For small firms that is a burden. For larger firms it may not be such a burden.

I wish to quote that famous Scottish economist, Adam Smith—I am sure my friends in the Scottish National party will be glad to hear this. He set out in his principles of taxation that in the collection of taxes there should be economy, certainty and equity. I believe that having more capital allowances militates against that and makes it more costly, and firms will have less certainty about what their eventual tax bill should be. That is one of the reasons why I welcome clause 43 and some of the other clauses that reduce the number of allowances, as that simplifies the tax system and makes taxes easier to collect.

There may be only 10 companies that claim the vaccine research relief, but that requires an infrastructure to carry out the collection and a number of civil servants to be appointed to do the job. If we want to find ways of cutting the cost of collecting taxes, it makes sense to look at reliefs that may not be widely used but still absorb resources within HMRC. For these reasons, my party and I will not support the opposition to clause 42 and we will join the Government in pushing it through.