Finance (No. 2) Bill

Richard Foord Excerpts

Report stage
Tuesday 20th June 2023 Commons Chamber

[Priti Patel]

I thank my hon. Friend for his support for the amendment and for his comments. As we have discussed previously—I was going to touch on this—the United States is not in a position to introduce the policy. It is a fact—politics in the US is like politics here or anywhere in the world—that the Republican party has made it abundantly clear that it will not allow this policy to go through. It wants to go further and to bring in legislation that will put retaliatory measures in place against countries that impose the new tax and burdens on US businesses and multinationals.

Returning to the amendment, I will come on to some specifics with regard to the dialogue I have been having with the Minister and the Chancellor on this subject. It is right that we scrutinise the policy, which the amendment seeks to do. It is right for the Government to pursue international agreement to address the complex tax arrangements, which hon. Members have referred to, that exist with multinational corporations and businesses operating in multiple jurisdictions. That is vital and makes sense.

[Richard Foord (Tiverton and Honiton) (LD)]

On the point about multinational corporations, does the right hon. Member think that it is right that we treat multinational corporations that produce oil and gas in a different way from the way we treat renewable energy companies, including companies that produce renewable energy and invest in renewable energy projects? At the moment, it seems that the energy profits levy treats those things in different ways. Will she be supporting Liberal Democrat amendments to the Bill to encourage investment in renewable energy projects?

[Priti Patel]

I thank the hon. Gentleman for his comments. I would rather businesses had zero taxation policies. I should declare an interest: when I was a Treasury Minister many years ago, I undertook the fiscal review of oil and gas. Frankly, we need to do everything to stimulate investment in both oil and gas and renewables. I would like to see consistency in policies on that.

Specifically to my point about multinationals and how they are taxed in jurisdictions, I support the Government in the sense that it is right to look to close tax loopholes where we see companies operating in multiple jurisdictions, but the plans for a global minimum tax are wrong, as I have raised in the House before. They are wrong and flawed for a number of reasons.

No one would deny that the introduction of such a measure is complex—it is not straightforward. I paid attention to the comments made by the hon. Member for Ealing North. There is no point just saying that we need to crack on and implement this; we have to do it in the right way, which is why I put forward the amendment. It even gives the Government scope for more time to look at the complexities around its implementation and to look at what our competitors are doing. We should not rush headlong into this. These are complex changes that will be challenging to enforce; I will speak about that, too.

I believe the measure is anti-competitive. It undermines our fiscal sovereignty. Without labouring the point too much, we have left the EU. The Government have the ability to make their own tax laws and fiscal sovereignty is crucial to this, too. Why are we are now going to surrender tax powers to the will of the OECD?

Economic growth has already been mentioned by my hon. Friend the Chair of the Treasury Committee. We do not want to undermine our ability to be a low-tax global beacon of free trade. The Government are pursuing policies such as freeports. We all welcome that when it comes to competition, but we do not want to encourage a culture of subsidies, which this policy will do.

I believe that Governments and Parliaments must have flexibility to set their own fiscal policies and tax rates, striking a balance across all sectors, including multinational companies and small and medium-sized enterprises. Speaking as an MP for Essex, which is known to be an entrepreneurial county, SMEs are the backbone of our economy. We have to strike a balance between being competitive and having low tax rates to attract investment, and generating revenue to support public services—I agree with the hon. Member for Ealing North about that. If we are not competitive, we will not have the tax revenues to support public services. However, a minimum corporate tax would prevent us from doing that.

There are problems with the OECD’s plan, which is why I want to have greater scrutiny on implementation. The enforcement and implementation mechanisms are unclear and countries could find ways around them, which should concern us. They could find loopholes to circumvent the policy. The UK looks set to gold plate measures. We follow rules and standards when we sign up to them, which is the right thing to do when it comes to our Government policies. The same cannot be said for more than 130 countries that have taken an interest in the matter. For many, agreeing to the OECD framework appears to be more about rhetoric and the ability to take action on taxing multinationals, than making the changes necessary and following the committed approach that this Government plan to take. I have no doubt that the Minister will want to speak about that, because the Government are being diligent in their approach and more scrutiny is required.

Moreover, limiting fiscal freedoms opens the door for countries to entice investment from big businesses with big subsidies, which distorts the market. All hon. and right hon. Members will understand that in a subsidy race we simply cannot compete with the United States or even China. Some countries can pump millions of dollars into supporting investment from multinationals. That is not what we do in this country.

We are more competitive as a country in being able to deploy a full range of fiscal and tax-cutting powers, than we are in a race to the bottom with subsidies. There are serious concerns about how these plans will be enforced and, importantly, how disputes between countries will be resolved. I understand that negotiations with the OECD are taking longer than expected, which is not a surprise, and I think it will be some time before an agreement is reached, but by baking into primary legislation a requirement for us to implement without any further flexibility, we risk blindly signing up to a package where foreign officials could overrule decisions and interpretations in our own jurisdiction and in on our own Government.

The peer review panels, being set up to review implementation, could be made up of representatives from China or other hostile states—for example, Russia—all countries which are involved in the process and states that have concerning records on human rights, war crimes and other conflicts, which we debate in this House day in, day out. Frankly, they do not meet our standards and we should be cognisant of that. Our tax affairs could be judged by representatives from states that many in this House are concerned about.

There is then the issue of the date of implementation, which I have referred to in my amendment. The Government have been clear that they will implement the policy by the end of this year— as clause 264 states, from 31 December 2023. This measure, despite the concerns I am raising, can only have a chance of succeeding in the way the Government hope if it is implemented in a constituent manner by all states—or, if not that, by a critical mass—at the same time. This is where we have concerns. We are just not seeing this right now in other countries and among our competitors, because they are not as wedded to the date as we are. I understand why we have to put down the date to enshrine it in law.

The United States, as my hon. Friend the Member for South Dorset (Richard Drax) has mentioned, will not be able to take this through to implementation by 2024. The Republicans in the House of Representatives are opposing those plans. But as well as opposing and preventing the US—our largest trading power—from introducing them, they are threatening retaliatory measures on countries that implement the policy, and in doing so will penalise US-based companies. So we could have a situation where this Government introduce a tax measure that adversely impacts on our trade and investment with the US. Of course, that could have an impact on trade negotiations and some of the work that other Departments are doing—such as Business and Trade, for example.

It would be interesting to know from the Minister whether this issue was discussed by the Prime Minister and the President in their recent bilateral talks. The US is crucial in this, but it is not just the US that will not implement the policy. The EU members are not going to implement the policy fully on day one. They have been given six years to implement tit. In Asia, major economies and competitors are setting dates behind the UK: Japan, Singapore, Thailand and Hong Kong. Although that the Government have been clear about their intent, we need to know what they intend to do on implementation. I have put my own concerns about this tax on the record. I think the date is wrong.