Draft Income Tax (Trading and Other Income) Act 2005 (Amendments to Chapter 2A of Part 5) Regulations 2019
Debate between Kevin Hollinrake and Jesse Norman(4 years, 6 months ago)
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The Financial Secretary to the Treasury (Jesse Norman)
I beg to move,
That the Committee has considered the draft Income Tax (Trading and Other Income) Act 2005 (Amendments to Chapter 2A of Part 5) Regulations 2019.
It is a great pleasure to serve under your chairmanship, Mr Stringer.
The regulations make technical amendments to the rules governing offshore receipts in respect of intangible property—the hyper-sexy acronym is ORIP—that were introduced in the Finance Act 2019. The ORIP rules tackle large multinationals that have entered into arrangements to receive income from their intangible property—copyrights, patents and other intellectual property—in offshore territories where that income is either untaxed or taxed at low effective rates. The rules tax the proportion of that income that relates to the sale of goods or services in the UK.
ORIP reduces the opportunities for large multinationals to gain an unfair competitive and tax advantage by using contrived offshore intellectual property structures to reduce their tax burden, thereby levelling the playing field for businesses operating in UK markets. The rules as enacted include a regulation-making power to allow for amendments to improve targeting and minimise unintended consequences, and this statutory instrument is the result.
Following recent consultation, the statutory instrument makes technical changes to the detailed provisions that are necessary for the regime to work as intended. Overall, ORIP is still expected to yield £1.1 billion over the scorecard, and these changes do not affect the costings. Where they are relieving, most of the amendments are treated as having retrospective effect from 6 April 2019, when the ORIP rules commenced. A few of the amendments, where they are charging, will have effect prospectively from the day after the regulations are made.
Let me briefly say a few words about each amendment. First, ORIP is targeted at territories with which the UK does not have a full double tax agreement, or DTA. That is intended to ensure the UK remains compliant with its international obligations. The regulations make two changes to the scope of the legislation. First, they extend the ORIP charge to businesses that are resident in a territory that has a full DTA with the UK but where resident businesses do not qualify for relief under it. That may be because the business is of a type explicitly excluded from the agreement or because the income paid to the business is not covered by the double tax agreement. The effect of that is to bring as many low-tax territories within scope as possible while remaining consistent with the UK’s international obligations. The change is prospective and will take effect from the day after the regulations are made.
Secondly, the regulations introduce an exemption for companies resident in specified territories with which the UK does not have a full DTA. That exemption, which is subject to anti-avoidance conditions, will be used to ensure that ORIP does not apply to high-tax jurisdictions that do not have a full DTA with the UK.
Kevin Hollinrake (Thirsk and Malton) (Con)
I realise that these matters are very complex and we need to narrow down the opportunities for multinationals to shift their profits around, on which this Government have done much work. However, Google makes a 22% profit margin internationally and turns over around £10 billion in the UK, which means, with a corporation tax rate of 19%, that it should pay around £420 million a year in tax in the UK, yet it pays only around £70 million. Does the Minister agree that we cannot rest in our pursuit of increased measures until it pays the appropriate amount of UK tax?
Jesse Norman
I am grateful to my hon. Friend for his intervention, which reflects his characteristically acute understanding of financial and tax issues. Of course, the question in many of these cases—I will not take one in particular—is whether companies have paid the appropriate level of corporation tax in the jurisdictions where corporate tax is chargeable. There is then the separate question whether they pay a fair level of tax in the jurisdictions where they do business. He will understand that the latter is very much in the Government’s mind. That is part of the purpose of our new digital services tax, which we hope to introduce in the next Finance Bill and for which legislation has already been published.
Income Tax
Debate between Kevin Hollinrake and Jesse Norman(4 years, 10 months ago)
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Jesse Norman
Those companies’ return to profitability was the result of proper, prudent financial management. I remind the hon. Lady that in the specific case of the financial sector, the bank levy has taken billions of pounds a year more from the banks than the Labour tax that it replaced. I do not think her view has credibility.
The hon. Member for Bootle criticised the timetable, but it is designed specifically to keep uncertainty to a minimum. Far from the suggestion that it would create more uncertainty, the point of my saying that qualifying expenditure on new builds or renovations for which all contracts for the physical construction works were entered into on or before 29 October 2019 will be eligible for relief is precisely to give very clear direction to future investment. I do not agree with many of the points that he made.
Kevin Hollinrake
Does the Minister think that the hon. Member for Bootle understands how reliefs work? He said that it was about giving away millions of pounds to corporations. Actually, if a corporation invests on the back of a relief, it still costs that corporation money; it just makes the investment slightly more attractive.
Jesse Norman
My hon. Friend is right. The point of the relief we are giving through the structures and buildings allowance is precisely to level the playing field and to enable and encourage more business investment.
The hon. Members for Bootle and for Aberdeen North (Kirsty Blackman) asked about reviewing or monitoring. As they will be aware, the Treasury and HMRC continuously monitor tax reliefs according to the level of risk they pose, and they publish annual statistics on tax reliefs, including cost estimates where they are available.
I will now turn to the other points made by the hon. Lady. She says charitable organisations will be heavily affected. The statement that the acquirers of structures or buildings are asked to fill out consists of four factual pieces of information: first, what is the asset; secondly, when was it built; thirdly, when did it come into use; and, lastly, how much did it originally cost? That is not a heavy burden on any institution.
Regional Transport Infrastructure
Debate between Kevin Hollinrake and Jesse Norman(5 years, 2 months ago)
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The Minister of State, Department for Transport (Jesse Norman)
It is an absolute pleasure to see you in the Chair, Ms Ryan. I am not a huge reader of Tom Clancy, but I think that Jack Ryan could take your correspondence course when it comes to bravery in public office, so thank you very much indeed. I congratulate my friend the hon. Member for Barnsley Central (Dan Jarvis) on securing the debate, and all hon. Members who participated in the wide-ranging conversation.
I know that the hon. Member for Barnsley Central, with his mayoral hat on, will hope, as do the Department and I, that he will be able to complete the devolution deal that he has in mind for the Sheffield city region, releasing powers and funding. Although I know that is not always the position held on the Government Benches, we have been working closely with him on that. As he said, transport is essential for prosperity, growth and wellbeing across the whole country. We recognise that good transport infrastructure is absolutely essential to productivity. That point was well made by my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake), who highlighted the productivity gap in this country. That means delivering new infrastructure, from strategic and regional priorities all the way down to the local level. I will touch on all of those levels, while addressing as many of the points that have been raised by hon. Members as I can.
As hon. Members will know, in 2017 the Government published a very ambitious transport investment strategy, setting out our ambition to build a stronger and more balanced economy within the industrial strategy more widely, and responding to local growth priorities. That has conditioned the investments we have made ever since.
On the road side—hon. Members know that I am the roads Minister—we have invested heavily in existing transport infrastructure and new schemes, with some £15 billion being spent through road investment strategy 1 between 2015 and 2020. In the 2018 Budget the Government published objectives for road investment strategy 2, which will run from 2020 to 2025 and include £25.3 billion to be made available to further develop and improve the strategic road network. We are developing an affordable and deliverable investment plan for RIS2, which will be published later this year.
I could not help noticing that the hon. Member for York Central (Rachael Maskell) was extremely rude about road building and called it catastrophic. Does that constitute a change of policy on the part of the whole Labour party? I encourage her not to think of it in that way, because road investment strategy 2 not only includes hundreds of millions of pounds for cycling and walking schemes and an enormous investment in skills, which she cares very much about, but paves the ways for autonomous and electric vehicles, which will be the vehicle—if I may use the pun—for the decarbonisation and greening of our economy in the longer term.
Jesse Norman
I do not have time; I apologise.
In the 2018 Budget we also provided a top-up of £420 million for local roads, particularly to repair potholes. A share of £3.5 billion of the national roads fund over five years from 2020-21 will fund improvements in the middle tier of the country’s busiest and most economically important local authority A roads, such as the A66, which connects Cumbria to the north-east. I have made no secret of the fact that, in the spending review, I am pressing for a local roads settlement that follows a similar five-year pattern so that local authorities have more visibility and more capacity to make strategic decisions at a level that is, hopefully, at least as good as the present one.
Of course, we are not just investing in the strategic road network; we are continually investing in upgrades and improvements to rail, including £1 billion that has been invested so far in the great north rail project and £3 billion that will be spent over the next few years to improve rail journeys between Manchester, Huddersfield, Leeds and York. Every train on the Northern and TransPennine networks will be new or modernised by 2020.
On Northern Powerhouse Rail, the strategic outline business case has been received and is under review. We expect to develop a response to it in close co-operation with partners across the north. It has been suggested that scrapping HS2 is the best way to secure Northern Powerhouse Rail, but that is naive, if I may say so. The Government’s commitment remains unchanged. HS2 is one of the keys to developing Northern Powerhouse Rail, not least because Northern Powerhouse Rail trains will use HS2 infrastructure, including on the approach to Manchester and between Sheffield and Leeds. That may mean that HS2 infrastructure will have to be built first, as a priority, before NPR can be implemented on those stretches.
Rightly, active travel has been mentioned and has been a focus of the debate. The hon. Member for York Central spoke about mode shift, and I could not agree more—I spoke at the Modeshift awards earlier today. It involves investment in air quality, cycling and walking schemes, our new road to zero strategy and the future of mobility. We are heavily involved in all those things.
We have published a cycling and walking investment strategy, which sets out ambitions for 2040. So far we have made £1 billion available to local bodies over the next five years to invest in local cycling and walking schemes. We have supported 46 local authorities on specific schemes that they have in mind. I share the view of the hon. Member for Barnsley Central and am delighted that he is appointing an active travel commissioner. I take my hat off to Chris Boardman and to the other highly engaged local teams at mayoral authorities that are making transformative differences.
There is a question about the city versus town balance. Recent Government initiatives, such as the future high streets fund and the stronger towns fund, which was just announced, have tried to recognise that. That city focus has been well picked up by mayoral authorities, however, and in Manchester we have invested £250 million through the transforming cities fund, of which £160 million is going on cycling and walking schemes through the transformative Beelines project.
Hon. Members on both sides of the Chamber have expressed concerns about regional investment. There cannot be much doubt that successive Governments have under-invested in the north, which we recognise. However, we are investing in the north not just because of that, but because it is the right thing to do and it is essential to our future productivity as a nation.
The hon. Member for Easington (Grahame Morris) rightly mentioned perceptions of unfairness. He is probably more sophisticated than I am in looking at the specific regional differences, but he ought to know that new figures from the Infrastructure and Projects Authority show that central Government’s planned transport capital investment spend will be higher in the north-west, north-east, and Yorkshire and Humber than for London, the south-east and the south-west as a whole. That conceals regional variations, as he will be aware, but it is a highly encouraging sign overall.
I will crack on in the few minutes I have left, because I want to leave some time for the hon. Member for Barnsley Central to reply. At a regional level, we have supported sub-national transport bodies, which are important from our point of view, particularly in the production of a regional evidence base for our major road network. Hon. Members will know about the transformative move that took place on 1 April 2018, when Transport for the North became a statutory body. It is not just about the north; the Government have been clear that investment in the south-west is also important to that region’s economy, as the hon. Member for Plymouth, Sutton and Devonport (Luke Pollard) touched on. That is why we have just published “Investing in the South West”, building on ambitious plans to grow the region’s economy.
The hon. Member for Barnsley Central rightly said that there has been a lot of focus on cities. I have mentioned three obvious ways in which we have tried to address that head-on: first, through devolution deals and wider city regions; secondly, through the £2.5 billion transforming cities fund; and thirdly, through the new stronger towns fund and the future high streets fund, which comprise nearly £1.3 billion.
The future of mobility is of great importance. We are thinking hard about how to improve mobility, which does not just mean the autonomous and electric vehicles that will require higher quality road surfaces and that underpin the need for continued road investment. It also involves the £150 million that we have invested in Transport for the North for smart and integrated ticketing and the investment we have made in future mobility zones across the west midlands.
In the minute remaining, I will quickly pick up on some of the points raised by hon. Members. The hon. Member for Slough (Mr Dhesi), who is no longer here, which is a pity, asked whether we were dragging our feet on western rail links to Heathrow. The answer is absolutely not. The consultation concluded in June 2018 and Network Rail intends to submit proposals for planning powers later this year.
My hon. Friend the Member for Isle of Wight (Mr Seely) asked a whole host of questions—I wish I could respond to all of them. I have looked closely at the Green Book and think there is still work to be done on it. Frankly, in many ways the Treasury takes a Department for Transport lead on it, precisely to get away from an overly financialised or economic view. We have a five-case model, which includes environmental impacts and others. If hon. Members would like to come and discuss with officials how that works in specific cases, I would be happy to curate a roundtable or something of that kind.
A question was asked about the fragmentation of transport, which is always a concern and something that the Williams reviews is looking at. The hon. Member for Strangford (Jim Shannon), who is no longer here, made a point about connectivity. I could not agree with him more. The hon. Member for Kingston upon Hull West and Hessle (Emma Hardy) expressed her gratitude. I remind her of the definition of gratitude in “Yes Minister”, which is, “a lively expectation of favours to come”.
Oral Answers to Questions
Debate between Kevin Hollinrake and Jesse Norman(6 years, 2 months ago)
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Jesse Norman
The hon. Lady will be aware that substantial amounts of money have already been put aside to help local authorities that have been affected by air quality problems, and it is up to Oxford to see if it can apply for that money when it becomes available.
Kevin Hollinrake (Thirsk and Malton) (Con)
I drive an electric car, but many people do not. Northern powerhouse rail will take many cars off the road. The all-party parliamentary group on the northern powerhouse is calling for the northern powerhouse rail project to be brought forward to coincide with the completion of High Speed 2 in 2032. Will the Minister support that proposal?
Jesse Norman
I am always grateful for invitations to support proposals. I think I will leave that proposal to the specific Ministers concerned, but my hon. Friend will be aware it is a manifesto commitment.