Digital Taxation

Luke Graham Excerpts

Tuesday 27th March 2018 Westminster Hall

[Mr Ranil Jayawardena (North East Hampshire) (Con)]

It is a pleasure to serve under your chairmanship, Dame Cheryl, and to see in his place the Paymaster General, who is one of the most thoughtful Ministers in the Government and whom I look forward to hearing from later. I congratulate my hon. Friend the Member for Harborough (Neil O’Brien) on securing this important debate. I do not wish to go through content that has already been provided to hon. Members, but I do wish to approach the topic from a slightly different direction.

This is an exciting time for the United Kingdom. Whatever side of the fence people were on, we are leaving the European Union, and we need to ensure that the economy and the country are fighting fit, not only for businesses to exist for their own sake, but for the people they are there to create jobs and wealth for, and for the next generation who will live with the consequences of our decisions today.

I am very pleased that the Government have an agenda for a more global Britain. We are finding our feet in the world and want to ensure that we build bridges with more countries around the world, and become more internationalist and a great trading nation once again. In that context, it is important to consider, as my hon. Friend the Member for Havant (Alan Mak), who is not able to be in his place this afternoon, would say, the fourth industrial revolution, which is at a critical juncture in our country’s and the world’s history.

Technologies are emerging and affecting our lives in ways that former generations could not have imagined, perhaps in ways that we could not have imagined only 10 years ago. We are in a new era that builds and extends the impact of digitalisation in new and unanticipated ways. In that context, it is important that my hon. Friend the Member for Harborough secured this debate.

In 2016, digital tech employed some 1.5 million people in this country with about £6.8 billion worth of investment in the United Kingdom, which is 50% higher than any other European country, which shows that this country is leading the way. There is always more to do, but we have a good track record of success. It is important to cite that, because we must ensure that, as we develop our industrial strategies, and as the Government develop their digital taxation policies, we continue to back the innovators and drive growth. We must support those creating jobs and those who trade with the world to create lower prices for our consumers, providing greater choice for people across this country, but we must step in when people do not play by the rules.

Some Members have made the point about the delicate balance whereby we want to grow the economy and back those who do the right thing, but must ensure that it is fair. It is that sense of fairness—it is almost a gut feel—that people out in the country feel is often not delivered on. I welcome the fact that the Government are trying to tackle that but, as I said, there is always more to do. That comes in the great context of the UK economy growing. It continues to grow—it has grown 14.8% since 2010, perhaps confounding those who are pessimistic about the United Kingdom’s prospects in the years ahead. I mention that because it is important that digital taxation and the plethora of Treasury policy is pro-business and pro-people.

Corporation tax is 19%, down 9% since 2010, with a target of going further, which is a good thing, but I agree with my hon. Friend the Member for Grantham and Stamford (Nick Boles), who referenced earlier in an intervention that it is not just corporation tax that counts, and that business rates are very important to small businesses, to which we have given a significant number of exemptions. That is welcome, but there is always more to do. Why? Someone can have a big warehouse in any town or even in the countryside selling lots of very low-margin products, on which they will not make much profit.

Such businesses face challenges when they compete with small offices, or perhaps not even offices, selling high-margin products but paying low rates or no rates, and of course they compete with others further afield who have a different tax regime, with different rates or different regimes entirely. We must ensure we are internationally competitive. Just as we have reduced corporation tax so that we are leading the world, we must ensure we do the same in other taxation.

It is important that we raise taxation in a fair way. We are raising taxation because, without a strong economy delivering it to the Exchequer, we cannot fund public services. Nor can we help people to keep more of the money they earn. We have cut income tax for 31 million people, raising the personal allowance to do so. We have taken a lot of people out of tax altogether. We can afford those things in the long run only if we get taxation right, and only if we ensure that business taxes are internationally competitive. We should encourage businesses to base themselves here, and ensure that they genuinely get money into the Exchequer.

As I said earlier, we must ensure that the system is fair, because tax evasion and aggressive tax avoidance irks people. I am pleased that, since 2010, HMRC has recovered £160 billion for the Exchequer, which is good news. That money can go into public services when it did not previously. I understand we are trying to combat online VAT fraud as well. That is good progress, but there is more to do.

I note in the Government’s report that they seek to have more OECD and G20 co-operation to control those measures and tackle the issues. The report states:

“the preferred and most sustainable solution to this challenge is reform of the international corporate tax framework”.

I agree with that because there is no point in our doing one thing if other countries do not follow, and no point in our doing one thing if we cost jobs in this country and put businesses out of business. That is not in the Government’s, the country’s or the people’s interest.

Businesses employ people who need to look after themselves and their families through the security of a job. We must maintain competitiveness and ensure we deliver lower taxes for all, but we must ensure that those taxes are fair and that they are paid. I am afraid to say that that is absolutely in stark contrast to Labour party policy. Although the hon. Member for Bootle (Peter Dowd) is a good chap with whom I have had many pleasant exchanges, I have concerns that the Labour party—I wait to be confounded and corrected—does not seem interested in how to make businesses and taxes work, and instead is looking at policies concerned only with protectionism, looking at the past and taxing hard-working people more.

[Luke Graham (Ochil and South Perthshire) (Con)]

My hon. Friend is making a very good point about Labour and tax, but it is not just about Labour. It is important to take into account the Scottish National party. Its tax-varying powers were used to increase bands of taxation, which has led to unintended consequences. The impact on marriage allowances and pensions and things will disadvantage people in our constituencies.

[Mr Jayawardena]

My hon. Friend makes a strong point. It is right that we consider the implications across the whole of this country of the policies of the Labour party and the SNP-led Government. We should also look at where the Liberal Democrats and Greens wish to take our taxation system, which is wrong-headed in so many ways. The tax systems they espouse seem to look back and to tax people more. They do not seem to be interested in how to boost business. They are not interested in the future. They do not seem to care about the next generation and how we will ensure that we create a Britain fit for the future.