Finance (No. 2) Bill

Richard Fuller Excerpts

Committee stage & Committee of the Whole House (Day 1)
Monday 19th April 2021 Commons Chamber

[James Murray]

I thank the right hon. Gentleman for his comments, but as I have set out, the annual investment allowance already appears to serve small and medium-sized enterprises well. The super deduction that we are debating now is designed to help companies such as Amazon, which do not need any help with their investment. It is important that we see this in the context of those companies that have done well throughout the outbreak and are already avoiding much of the tax they should be paying. It is no wonder that Tax Watch has nicknamed this the “Amazon Tax Cut”. This giveaway from the Chancellor could wipe out Amazon’s UK tax bill entirely.

Analysis of Amazon’s accounts from 2019 shows that the corporation’s UK operations made pre-tax profits of £102 million. In the same year, it spent £67 million on plant and machinery, £80 million on office equipment, and £15 million on computer equipment. The super deduction would have enabled Amazon to deduct £211 million from the calculation of its taxable profits— more than enough to wipe out its entire tax liability twice over. It is truly astonishing that, faced with all the challenges of this outbreak, the Government see their priority as giving Amazon a tax break.

Here and around the world, people agree with us that investment in jobs and growth is what is needed. A tax break for tech giants that already fail to pay what they should is not the answer. That is why our amendment 79 would explicitly prevent the biggest tech firms from taking advantage of the Chancellor’s tax break, as well as other big firms that do not support workers’ rights and the living wage.

The Government should be improving the lives of Amazon workers, who have helped so many people with deliveries throughout the pandemic, not giving a huge tax break to their bosses. Amendment 79 would prevent Amazon and other tech giants from accessing the super deduction by preventing firms from doing so if they are liable for the digital services tax. When the Government set out their plans for the digital services tax, they made it clear that it would apply to businesses that provide social media platforms, search engines, or online marketplaces to UK users. The detail of that tax means that businesses will be liable when the group’s worldwide revenues from these digital activities are more than £500 million, and when more than £25 million of these revenues are derived from UK users.

We are clear that those big corporations that should be caught by the digital services tax are among those that absolutely should not be benefiting from the Government proclaim as the biggest business tax cut in modern British history. We know that Amazon has brazenly made it clear that it will dodge the bill from the digital services tax by passing the cost on to its marketplace sellers. The fact that it is not even paying the tax that was designed for it to pay makes the prospect of a further massive tax cut from the Chancellor even more galling.

Furthermore, as well as excluding big corporations on the basis of their being liable for the digital services tax, we are seeking to use our amendment to stop those big businesses that do not support workers’ rights and the living wage from accessing the tax break. Both conditions would also catch Amazon and would also require other big businesses—those that are not liable for the digital services tax—to respect the right to organise and collective bargaining, and to be certified, or be in the process of being certified, by the Living Wage Foundation as a living wage employer.

When firms stand to benefit from what the Chancellor has called the biggest business tax cut in modern British history, the very least the Government should require of them is that they pay their workers the living wage and respect workers’ basic rights to organise. Alongside this, we propose in amendment 80 that the Government require big firms benefiting from the Chancellor’s tax break to make a climate-related financial disclosure, in line with the recommendations of the Task Force on Climate-related Financial Disclosures.

Beyond the specific issue of how the biggest corporations are set to benefit from this tax break the most, we have also tabled new clause 24 to reflect the widely-held concerns about the impact of the super deduction on levels of tax avoidance and evasion. As the chief executive of the Resolution Foundation has made clear, investment incentives have been abused for tax avoidance purposes in the past, yet the Government have failed to say or do anything to address widespread concerns that the super deduction is open to fraud and abuse.

As I mentioned on Second Reading, economists from the Institute for Fiscal Studies have said that the super deduction will

“create a risk of tax avoidance and even potentially fraud as companies essentially try to find ways to dress things up as plant and machinery investment”.

Minsters were unable to reassure us on this point when I raised it last week, so we are asking for the levels of tax avoidance and evasion arising from the super deduction to be reviewed and put transparently before this House.

It tells us everything about the Conservatives’ priorities that they are taking money from people’s pockets at the very same time as letting tech giants off paying tax altogether. This Government are proposing to wipe out some of the biggest corporations’ tax bills through a £25 billion boon, aimed at the biggest corporations, that the Chancellor has called

“the biggest two-year business tax cut in modern British history.”

In the face of a struggling economy, a tax break for tech giants that already do not pay enough tax should be the last thing on the Government’s mind. Instead, it is top of their list. They are wrong.

[Richard Fuller (North East Bedfordshire) (Con)]

Will the hon. Gentleman give way?

[James Murray]

No, let me make some progress.

The Government are wrong, and that is why we will be voting to stop the Chancellor’s tax break going to the biggest tech firms or other big corporations that do not support workers’ rights and the living wage. We need a fairer tax system and we need investment in jobs and growth. This Government’s Finance Bill fails on both fronts. I urge Conservative Members to show that they understand this, support our amendments today and take a stand against the Amazon tax cut.

--- Later in debate ---

[Ben Lake (Ceredigion) (PC)]

It is a pleasure to speak in this debate, Sir Charles. I rise to speak in support of amendment 53, which I hope will encourage the Government to bring some rigour and meaning to their rhetoric of levelling up and the use of taxpayers’ money.

In a Budget that confirmed £17 billion of spending cuts, relative to March 2020 plans, the Chancellor’s decision to announce the super deduction, equivalent to forgoing approximately 20% of the UK’s corporation tax revenues, was certainly a bold one, particularly as the Financial Secretary noted in November 2020 that the existing annual investment allowance already covers 99% of all UK businesses. The House has heard this evening that the super deduction is a major tax break for the top 1% of UK businesses. We have also heard many concerns that it is a blunt tool in need of significant refinement if its perceived benefits are to be targeted to those in greatest need of support. I also point to concerns that the super deduction will disproportionately benefit London and the south-east of England and that it flies in the face of the Government’s commitment to level up the UK economy.

I draw the House’s attention to a finding from the Centre for Progressive Policy, which has calculated that, although the super deduction could amount to a tax break worth up to £513 for London residents, it would be worth only half as much in Wales, whose sum benefit is the second lowest of the UK nations and regions, with only Northern Ireland benefiting less on this measure.

I am afraid that I disagree with other hon. Members who have suggested that the super deduction might, on the contrary, actually benefit and address regional inequality. My fear is the opposite—that the super deduction will, at best, lock in existing regional inequalities and, at worst, exacerbate rather than address the UK’s geographical economic imbalance. That is why Plaid Cymru wishes to amend the Bill to require that the Chancellor considers the impact and geographical extent of the super deduction across all the UK’s nation and regions and would support calls made by other hon. Members this evening that measures should be introduced to establish a deeper evidence base for these changes. Similarly, given the urgent need for climate action and the retooling of the economy for a net zero future, this amendment also requires the UK Government to consider the super deduction’s impact on efforts to mitigate climate change.

I hope that the Government will incorporate guarantees such as these into the Bill to ensure that we truly do rebuild back better from the pandemic, rather than resuscitate the UK’s deeply flawed pre-pandemic economy. Failure to do so would make it clear that their rhetoric of support for all nations, for the levelling-up agenda and for climate action are no more than fine words and lofty intentions.

[Richard Fuller]

It is right, as our hard-working business leaders emerge from the most torrid 12 months, that the Government set a clear course for their understanding of how those businesses will be taxed in future. I would have hoped that it would have been heartening for the people who have been running businesses through these most difficult times to listen in to this debate to hear what Members of Parliament have to say on their behalf. However, personally speaking, I think that most people who run businesses will be rather saddened by what they have heard—largely, a perspective that it is wrong for people to run businesses that are profitable, that there is sin in becoming rich by creating a business that creates products that people want, rather than virtue, and a complete lack of understanding that businesses that make profits are a sign of success, rather than a sign of failure.

Personally, I am rather in favour of us increasing taxes. When this or any Government seek to increase tax on corporations, I wonder whether they realise that, essentially, they are putting a tax on success—that every pound that we take away from a business, from its profits, is a pound taken away from things that the business owner may do him or herself. They might be radical things, such as investing in and expanding the number of people who work for the businesses, investing in machinery that will make their business more competitive in terms of exports, or lowering their debt so that they are on a more substantial and more stable footing for the long term. Every time a state takes away money from enterprise it is putting at risk the resources those companies have to do those things, and the future success of this country. Therefore the Government were right to consider carefully how to balance a change in corporation taxes, and given what has happened subsequently to the Budget, the Chancellor deserves a bit of a pat on the back for understanding what would be going on in the global realm of corporation tax, as well as the crucial importance of providing some short-term incentive for businesses to invest as we emerge from the recession.