Finance (No. 2) Bill

Debate between James Murray and Sammy Wilson

Committee stage & Committee of the Whole House (Day 1)
Monday 19th April 2021 Commons Chamber

[James Murray (Ealing North) (Lab/Co-op)]

I rise to speak to the provisions standing in my name and those of the Leader of the Opposition and my right hon. and hon. Friends. On behalf of the Opposition, I will begin our detailed scrutiny of this Bill today by considering the impact it will have most immediately and most widely on people across the UK through its cuts to the money that families, in all their many forms, have in their pockets.

The opening clauses, 1 to 5, focus on income tax, with clause 5 freezing the personal allowance from 2022-23 through to 2025-26. That is no small change; the effect of the clause will be to make half of all people in the UK pay more tax from next year, and that is not the only measure the Government are taking that raids their pockets. We know that this Bill will make families pay more through the income tax changes next year, but it also does nothing to stop the sharp council tax rise that the Government are forcing councils to implement right now, it supports the Chancellor’s plan to cut £20 a week from social security this autumn for some of those who need help most, and of course it comes as the Government are choosing, in this year of all years, to take money from the pockets of NHS workers.

[Sammy Wilson (East Antrim) (DUP)]

Does the shadow Minister accept that the total take in income tax from individuals across the United Kingdom as a result of that one measure in one year will be £10 billion, and the total take over the next five years will increase by 25%? On the basis of the tax paid now, 25% more income tax will be paid collectively by individuals as a result of simply freezing thresholds.

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[James Murray]

I rise to speak to the amendments and the new clause in my name, that of the Leader of the Opposition and those of my other right hon. and hon. Friends.

In the preceding debate, we saw how this Finance Bill will hit families, in all their many forms across the country, by making half of all people in the UK pay more tax from next year. As I made clear, the sense of injustice is made all the more acute by the fact that that increase in costs for families comes before any rise in corporation tax and that at the same time, through this Bill, the Government are letting tech giants stop paying tax altogether.

Clauses 6 to 8 make it clear that the proposed changes to corporation tax will come after increases to the income tax personal allowances, while clauses 9 to 14 centre on the so-called super deduction, a £25 billion tax break targeted at big corporations that the Chancellor has said represents

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

That tax break forms the centre of the Chancellor’s strategy set out at the Budget, and it comes with a huge cost attached to it. We need to be absolutely clear who will benefit from it.

One thing is clear: that tax break is not targeted at small and medium-sized businesses. The truth is that such businesses can already benefit from the annual investment allowance, a 100% tax break on investment up to £1 million, which clause 15 extends to the end of this year. The Financial Secretary was very clear in his written statement of 12 November 2020, which announced the extension, that it:

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

Indeed, the Treasury Committee concluded in its report published in February, “Tax after coronavirus”, that the annual investment allowance

“appears well targeted to promote growth in small and medium-sized enterprises.”

The existing allowance is said to be well targeted at the growth of small and medium-sized businesses and, by the Financial Secretary’s own admission, it already benefits 99% of businesses, which will benefit only marginally from the new super deduction. Who does that leave? It is very clear who will be the main beneficiaries of the Chancellor’s new scheme. It will be a tax break for the 1%.

[Sammy Wilson]

Does the shadow Minister not accept, first, that large businesses are an important component of our economy and we need to increase productivity in those businesses as well as in small businesses, and secondly, that many large industries, such as the aviation industry, have been badly hit by the pandemic and would benefit from the kind of tax allowances proposed in the Bill?

[James Murray]

I thank the right hon. Gentleman for his comments, but as I have set out, the annual investment allowance already appears to serve small and medium-sized enterprises well. The super deduction that we are debating now is designed to help companies such as Amazon, which do not need any help with their investment. It is important that we see this in the context of those companies that have done well throughout the outbreak and are already avoiding much of the tax they should be paying. It is no wonder that Tax Watch has nicknamed this the “Amazon Tax Cut”. This giveaway from the Chancellor could wipe out Amazon’s UK tax bill entirely.

Analysis of Amazon’s accounts from 2019 shows that the corporation’s UK operations made pre-tax profits of £102 million. In the same year, it spent £67 million on plant and machinery, £80 million on office equipment, and £15 million on computer equipment. The super deduction would have enabled Amazon to deduct £211 million from the calculation of its taxable profits— more than enough to wipe out its entire tax liability twice over. It is truly astonishing that, faced with all the challenges of this outbreak, the Government see their priority as giving Amazon a tax break.

Here and around the world, people agree with us that investment in jobs and growth is what is needed. A tax break for tech giants that already fail to pay what they should is not the answer. That is why our amendment 79 would explicitly prevent 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.

The Government should be improving the lives of Amazon workers, who have helped so many people with deliveries throughout the pandemic, not giving a huge tax break to their bosses. Amendment 79 would prevent Amazon and other tech giants from accessing the super deduction by preventing firms from doing so if they are liable for the digital services tax. When the Government set out their plans for the digital services tax, they made it clear that it would apply to businesses that provide social media platforms, search engines, or online marketplaces to UK users. The detail of that tax means that businesses will be liable when the group’s worldwide revenues from these digital activities are more than £500 million, and when more than £25 million of these revenues are derived from UK users.

We are clear that those big corporations that should be caught by the digital services tax are among those that absolutely should not be benefiting from the Government proclaim as the biggest business tax cut in modern British history. We know that Amazon has brazenly made it clear that it will dodge the bill from the digital services tax by passing the cost on to its marketplace sellers. The fact that it is not even paying the tax that was designed for it to pay makes the prospect of a further massive tax cut from the Chancellor even more galling.

Furthermore, as well as excluding big corporations on the basis of their being liable for the digital services tax, we are seeking to use our amendment to stop those big businesses that do not support workers’ rights and the living wage from accessing the tax break. Both conditions would also catch Amazon and would also require other big businesses—those that are not liable for the digital services tax—to respect the right to organise and collective bargaining, and to be certified, or be in the process of being certified, by the Living Wage Foundation as a living wage employer.

When firms stand to benefit from what the Chancellor has called the biggest business tax cut in modern British history, the very least the Government should require of them is that they pay their workers the living wage and respect workers’ basic rights to organise. Alongside this, we propose in amendment 80 that the Government require big firms benefiting from the Chancellor’s tax break to make a climate-related financial disclosure, in line with the recommendations of the Task Force on Climate-related Financial Disclosures.

Beyond the specific issue of how the biggest corporations are set to benefit from this tax break the most, we have also tabled new clause 24 to reflect the widely-held concerns about the impact of the super deduction on levels of tax avoidance and evasion. As the chief executive of the Resolution Foundation has made clear, investment incentives have been abused for tax avoidance purposes in the past, yet the Government have failed to say or do anything to address widespread concerns that the super deduction is open to fraud and abuse.

As I mentioned on Second Reading, economists from the Institute for Fiscal Studies have said that the super deduction will

“create a risk of tax avoidance and even potentially fraud as companies essentially try to find ways to dress things up as plant and machinery investment”.

Minsters were unable to reassure us on this point when I raised it last week, so we are asking for the levels of tax avoidance and evasion arising from the super deduction to be reviewed and put transparently before this House.

It tells us everything about the Conservatives’ priorities that they are taking money from people’s pockets at the very same time as letting tech giants off paying tax altogether. This Government are proposing to wipe out some of the biggest corporations’ tax bills through a £25 billion boon, aimed at the biggest corporations, that the Chancellor has called

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

In the face of a struggling economy, a tax break for tech giants that already do not pay enough tax should be the last thing on the Government’s mind. Instead, it is top of their list. They are wrong.