Multinational Companies and UK Corporation Tax

Catherine McKinnell Excerpts

Thursday 27th June 2013 Commons Chamber

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

Let me begin by commending the hon. Member for Warwick and Leamington (Chris White) for securing this Backbench Business Committee debate, ably supported by my hon. Friends the Members for Newcastle-under-Lyme (Paul Farrelly) and for Paisley and Renfrewshire North (Jim Sheridan).

Once again, we find ourselves discussing the challenge of corporate taxation—an issue which increasingly agitates not just businesses up and down the country but members of the public. The mood could not really be better exemplified than by the constituents of the hon. Member for Warwick and Leamington, who run the independent bookshop Warwick Books. As the hon. Gentleman outlined, Francis and Keith Smith achieved quite a remarkable feat by gathering 170,000 signatures for their petition calling on a certain online bookseller to pay its fair share of corporate tax. They highlighted the fact that last year the company made £3.3 billion of sales in the UK, yet it is not registered to pay corporation tax here.

The hon. Gentleman’s constituents and I have something in common in that we both studied at Northumbria university. I also understand that one of them once worked at Fenwick’s, which is a great Newcastle department store. So it is enough to convince me of their pedigree.

We have had a thoughtful and productive debate, with excellent contributions from both sides of the Chamber. All hon. Members have noted the cross-party agreement, certainly on the problem and the diagnosis, if not necessarily on the cure. I commend my right hon. Friend the Member for Barking (Margaret Hodge) for her contribution, for her powerful chairing of the Public Accounts Committee, and for the work it has done, and I commend all the members of the Committee who have raised this issue in the eyes of the public.

At the beginning of this year, my right hon. Friends the Leader of the Opposition and the shadow Chancellor laid down a challenge to the Government to end the era of tax secrecy and to use the G8 presidency to do that, both by showing international leadership and by taking action here at home. I think we all agree that sometimes there are good reasons why companies pay little, reduced or even no tax: some firms are investing large sums in research and development, assets and infrastructure, and where that is done for genuine commercial reasons and not simply to minimise their tax liability, it is to be welcomed and has to be acknowledged in the tax system. However, as I have said previously in this Chamber, something has gone very wrong in the system when a large multinational company can make £1.2 billion-worth of sales in this country and describe itself to investors as profitable, yet report no UK tax liability.

It is not only UK taxpayers who pay the price of such profits shifting, although the loss to the Exchequer is significant, and my hon. Friend the Member for North Ayrshire and Arran (Katy Clark) powerfully argued the case for why this is so important to the UK Exchequer. Such behaviour totally undermines the notion of a level commercial playing field by putting at a serious disadvantage responsible firms that pay their fair share of tax on profits generated in this country, as well as employ thousands of people here and pay all the associated taxes. There are those who believe that the problem is just too difficult, too complicated, too entrenched to tackle, and I suspect that that is what some people—especially those who are involved in that sort of activity—would like us to think, but we believe that there are measures that the Government could and should be instigating right now to end the era of tax secrecy and move us toward the greater transparency that is so desperately required if we are to rebuild confidence in our tax system.

To give him his due, the Prime Minister committed to putting tax avoidance at the top of the G8 agenda when world leaders met in Northern Ireland last week, and many people—including several million campaigners for tax transparency—had high hopes for what could be achieved through the UK presidency of the G8. Ahead of the summit, we called on the UK to push for an internationally agreed system of country-by-country reporting in which multinational corporations, regardless of sector, would be required to publish a simple statement of the amount of tax they pay. We believe that that information should incorporate multinational revenues, profits and taxes paid in every country in which they operate, and include the key pieces of information that enable people, whether they are experts or not, properly to assess the amount of tax they pay. That would also benefit British consumers by enabling them to make informed choices about the companies they buy from. The G8 leaders’ communiqué stated:

“We call on the OECD to develop a common template for country-by-country reporting to tax authorities by major multinational enterprises, taking account of concerns regarding non-cooperative jurisdictions.”

That is a serious step in the right direction, but we need to see far more detail and we need to see it soon.

Today, we have heard about various tricks used by multinationals to minimise or avoid their tax liability in this country—for example, shifting profits and using complex corporate tax structures. It is increasingly clear that we have failed to keep pace with the changes, and my hon. Friend the Member for North Ayrshire and Arran talked about the resources HMRC needs to tackle the problem. We need progress on transparency if we are to put a stop to multinational and global companies hiding behind an unacceptable veil of secrecy about their tax.