Income Tax (Charge)

Jonathan Edwards Excerpts

Thursday 4th March 2021 Commons Chamber

[Jonathan Edwards (Carmarthen East and Dinefwr) (Ind)]

It is a pleasure to speak in this debate. Pandemics by their very nature offer an opportunity for reflection about the sort of society we want to develop for the future. If the aftermath of this dreadful pandemic is not an opportunity for a reset, when will there ever be one? It is not as if the structural or economic deficiencies of the British state are not obvious to all, with chronic geographical, sectoral and individual wealth polarisation and an over-reliance on one economic sector.

I welcome the Chancellor’s commitment to underpinning public health strategies with economic support, and extending furlough to September seems sensible. However, if for whatever reason the Welsh Government are required to implement a different strategy to control the virus—for instance, as the result of a new autumn wave—will measures such as furlough be extended, or does the unionist talk about the broad shoulders of the British state only apply to Wales if it also benefits England?

On corporation tax, I support the proposed increase to 25%. The Washington-based thinktank the Tax Foundation estimates that the global average corporation tax rate is just over 25%. France and Germany have rates of 30%, and the Biden Administration have announced plans to increase the rate in the US from 21% to 28%. Therefore, it is difficult to make the case that a 25% rate in the UK would be uncompetitive. Of Biden’s three-year $1.4 trillion extra taxation plan, according to Moody’s Analytics, well over half—$822 billion—comes from corporate taxation. Equally important is the Biden Administration’s determination to target firms that offshore jobs and those that shift profits overseas.

The Chancellor’s income tax proposals are far too timid. He should have followed the new US Administration by increasing income tax directly on incomes above $400,000—about £300,000—by introducing a new pandemic tax band. However, the redistributive zeal required to tackle the UK’s inequalities should also look at taxation on held personal wealth, as is the case in Norway, Switzerland, and Spain.

I hope the Treasury’s tax day on 23 March will signal a full-scale review of how wealth in the UK can be taxed more fairly and justly in the long term. It will also be an opportunity to finally introduce much needed reforms of capital gains tax and to investigate the possibility of varying corporation tax within the UK. This would be one way to help redirect investment to those less productive parts of the British state. Considering that only three of the UK’s regions and nations are in surplus, this might be one way to address the geographical wealth disparities that exist in a far more coherent manner, I suspect, than sporadic freeports.

It is also imperative that the UK find an answer to the question of how to tax the digital world. I appreciate that the G7 will be a key forum to discuss a global digital tax regime, and I welcome the tentative first steps taken by the UK Government with the introduction of the digital services tax. However, now is time for the UK to go further and faster, leading by example and setting global standards. This is crucial, given the pandemic-induced shift to online retail, with online sales accounting for a record 35% of total retail spending in January 2021, up from 20% in February 2020.

The political choice facing electors as we emerge from this pandemic is between the forces that want to return to the old normal and those that believe the pandemic must result in the creation of a new economy that works for all, not just for the select few. The Chancellor nailed his colours to the mast in the Budget as the former. I will be arguing forcefully for the latter as a key part of a prospectus for an independent Wales.