Budget Changes

Debate between Stephen Timms and David Gauke

Monday 21st March 2016 Commons Chamber

[Mr Gauke]

My hon. Friend puts it very well. This is a Government, and this is a Chancellor of the Exchequer, who have turned round the economy. We are in a position to be growing strongly compared with our international competitors, and we are bringing the public finances under control, having inherited the mess that would did in 2010.

[Stephen Timms (East Ham) (Lab)]

The Chancellor made no effort to justify the cut in disability benefits in the Budget statement, beyond saying that it would save a lot of money. Yesterday, we heard from the former DWP Secretary that the Chancellor’s view is that people claiming disability benefits will never vote Conservative so there is no reason for restraint in cutting their benefits. Will the Financial Secretary respond to that allegation?

[Mr Gauke]

That was not even the allegation. The reality is that, if we look at spending on disability living allowance and personal independence payments, it has gone up since 2010 by £3 billion—that is not a Government who are cutting at the expense of disabled people.

Tax Avoidance and Multinational Companies

Debate between Stephen Timms and David Gauke

Wednesday 3rd February 2016 Commons Chamber

[Mr Gauke]

I will come on to transparency, but let me first return to this Government’s record on changing domestic law and leading the way in updating the international system.

This Government have led internationally on the G20 and OECD base erosion and profit-shifting project, making the international tax rules fit for the 21st century. My right hon. Friends the Prime Minister and the Chancellor of the Exchequer, in particular, took on highly prominent roles in initiating those discussions and taking them forward through the G20 and the OECD. The outcome will be to level the playing field among businesses, give tax authorities more effective tools to tackle aggressive planning, and help us better align the location of taxable profits with the location of economic activities and value creation. This is a major step forward in addressing the underlying causes of aggressive tax avoidance.

We have been at the forefront of implementing this agenda, acting swiftly to change the rules on hybrid mismatches and country-by-country reporting. Because we consider it important not to rely solely on international rules, we have also legislated domestically to introduce a world-leading measure to address the contrived shifting of profit from this country—the diverted profits tax. The diverted profits tax targets companies that divert profits from the UK, principally those with substantial activities in the UK who are trying to avoid creating a UK permanent establishment. Under our rules, those companies either declare the correct amount of profits in the UK and pay the full amount of corporation tax on them, or risk being charged a higher amount of diverted profits tax at a rate of 25%. By the end of this Parliament, the diverted profits tax will raise an extra £1.3 billion, both directly and as a result of associated behavioural changes. The tax is already having that effect, and multinationals will pay more corporation tax as a result.

[Stephen Timms (East Ham) (Lab)]

Of course, the diverted profits tax was referred to as the Google tax. My hon. Friend the shadow Chancellor has alleged that under the terms of the deal Google will not pay a penny. Is he right about that?

[Mr Gauke]

The purpose of the diverted profits tax, which came into effect in April, is to ensure that companies stop diverting their profits and pay corporation tax like everybody else. I repeat that I cannot talk about the Google case beyond information that is in the public domain, but if this tax is effective in driving companies to stop diverting their profits, it is a success.