Finance (No. 2) Bill

Nigel Mills Excerpts

Report stage
Tuesday 20th June 2023 Commons Chamber

I ask the Exchequer Secretary to look at the tiny element I have described because there is a risk of undermining the good work that has been done for just 0.1% of beer that is consumed by people who choose to have one pint at home after they leave the pub. I hope that he can come up with a clause that will meet the needs of the industry and avoid the real risks that he previously highlighted.

[Nigel Mills (Amber Valley) (Con)]

It is pleasure to speak to amendment 21, which stands in my name. I also want to speak to the amendments on the Office of Tax Simplification, which my hon. Friend the Member for West Worcestershire (Harriett Baldwin) tabled and I was happy to put my name to.

In my more naive and mischievous days, I occasionally tabled amendments to Finance Bills that called on the OTS to review elements of tax. The last time I tried that was on corporation tax in about 2014 and the amendment was accidentally passed in the Bill Committee. I say “accidentally” because neither side knew that we were voting for the amendment. We thought we were voting to withdraw it and we had to rewrite history quickly and pretend that the amendment had not been passed. I have not been able to serve on a Finance Bill Committee ever since, or indeed any Bill Committee, so perhaps I could recommend that as a tactic for Members who do not enjoy them as much as I used to.

If we were being slightly mischievous, we could say that 13 years of the OTS has not resulted in a tax system that is a great deal simpler than the one we have now, but that is probably more the Treasury’s fault than the OTS’s. The serious point is that we need to find a mechanism whereby we can simplify our tax regime. It has got ever more complicated, and at some point we will see taxes start to fall over, because the complexity of different policy ideas over time that conflict with one another leaves us with a system that is incredibly hard to follow and to comply with and is putting undue costs on individuals and businesses.

We could, in a rolling programme, find a way of taking out some of this complexity by being a bit clearer in our policymaking about what we are trying to do. Are we trying to raise income? Are we trying to encourage or discourage certain behaviours? Are we trying to virtue-signal? Are we trying to win votes? Sadly, we do all those things at the same time, sometimes in conflicting ways, and end up with a rather strange system.

The amendments I want to speak to are about the global minimum corporate tax. I think I am the lone voice on the Back Benches who likes to speak in favour of this. I remember looking at this issue before I came here. The OECD has spent a very long time trying to find a solution to base erosion and profit shifting. A few years ago, it produced 15 or so ideas that were quite worthy but made absolutely no progress. The Government then introduced the diverted profits tax in the UK to try to tackle this issue on a domestic basis. It would be a terrible signal if the UK, having been one of the countries that signed up to this, now decided that we want to delay implementation and not go ahead with it.

To be fair, no other solution has been found to how we can stop certain large multinationals trying to hide revenue in low-tax jurisdictions that has no commercial basis for being there. We have tried changing transfer pricing rules, we have tried country-by-country solutions, and we have tried more reporting—we have tried all manner of things, but none of them has managed to fix the problem. That is why the two pillars in the most recent OECD deal, while far from perfect, are the best we are going to get. If we do not go ahead with those, we might see some even more radical, less consensual, less well thought-through ideas being brought in. We even see the UN starting to play in this space, and there is a real risk that what it produces may not be consistent with a coherent tax regime.

I am not the biggest fan of the OECD. I once described it as the “Organisation for Excessively Complex Drivel.” If we read the rules that we are putting through today, there is a real sign that it is excessively complex, and that was my motivation for tabling amendment 21. We probably could have found a better way of achieving the same thing, rather than UK-headquartered groups having to go through a very complicated series of calculations for every subsidiary they have in an overseas regime to try to work out whether they have paid the 15% minimum tax, when the headline rate in those countries is 25% or 30%, and it is extraordinarily unlikely that they will not have paid that 15% tax, and there may well have been timing differences that have to be worked through to try to prove that. That will be a huge compliance burden, and it will not add very much. It will not collect any tax, and it will just make these rules look a lot worse than they are.

The purpose of amendment 21 is to offer the Government the chance to extend the power that the transitional, lighter-touch regime we are allowed to use for the first three years of the rules that has been agreed by the OECD and use it for a bit longer, especially if not every country in the world is following our early implementation of these things, to try to avoid us imposing a compliance burden in the UK that will not exist elsewhere. I accept that that is not currently in the OECD agreement.

As more and more countries try to put these rules into their own domestic law, I think we might see them realise how fiendishly complicated they are and start to look for simpler ways of implementing them, so that we can focus on working out where real tax abuse—avoidance and evasion—is taking place and go and collect the tax that is not being paid, rather than having a big compliance burden. There are plenty of precedents for how we can do that in our own tax rules. We had the worldwide debt cap, which we do not need any more, so we scrapped it, but that had a gateway test. Companies went through a simple test, and if it was clear that they were innocent, they did not have to go through the full detail of the rules. I am sure that we could find some way around that. Our old foreign-controlled company rules had a list of territories that were treated as good unless there was any avoidance going on, and we could use a model like that.

I want to touch on why it is important that the UK takes a lead on this. I think it is fair to say that our overseas territories and Crown dependencies have been among those that have behaved the naughtiest around the world in terms of certain tax behaviours that they have encouraged or permitted in their jurisdictions. We are not going to get global progress on this issue if the UK is not at the forefront. If we say we will wait for the pack, half the world will think, “Well, they’re the ones that have been responsible for a whole chunk of this. If they’re not going to do it, we’re certainly not going to do it.” It is important that we are seen to take a lead in tackling this. Getting this right is hugely popular. Our constituents do not want to see large multinational corporations hiding their profits in low-tax jurisdictions. This sort of relatively moderate measure that we are opting into as part of a global deal does not have any sovereignty concerns.