Government rejects Labour amendment on global corporation tax minimum

Ministers have rejected a move by Labour to force the government to back a global minimum rate of corporation tax as MPs voted down a ‘new clause’ to the finance bill, by a majority of 103, requiring the government to review the proposal.

Commenting on the proposal, which is being promoted by US President Joe Biden’s administration, Labour’s James Murray told the House of Commons this evening that “people are fed up with large multinational companies avoiding their tax”.

“Despite their business success in the UK, profit shifting to Luxembourg meant Amazon’s corporation tax contribution in the UK in 2019 was less than 0.1% of its turnover,” the shadow financial secretary to the Treasury added.

“It goes against the fairness that must be at the heart of our tax system. In this year of all years, when so many British businesses are struggling to get back on their feet while Amazon’s business booms, it is clearer than ever that change is long overdue.”

He criticised claims from ministers that they are “leading the charge” on tackling international tax avoidance and highlighted that the UK is the only country in the G7 group of nations not to have backed the plan put forward by Biden.

“This is a once in a generation opportunity to grasp international agreement on the global taxation of global multinationals that has evaded our country and others for so long. Yet, rather than stepping up, our government is stepping away.”

The new clause from Labour, voted down by 364 votes to 261, would have required ministers to publish a review on the impact of the proposal for a 21% figure over both 2022 and 2023, and for a corporation tax rate of 25% for the year 2023.

Biden initially put forward a 21% global rate, but 15% was suggested most recently as a “floor” from which to build. 130 countries are involved in negotiations, and Germany, France, Canada, Italy and Japan have reacted positively to the plan.

Minister Jesse Norman argued this evening that the government has always been” tough, as tough as it can be, to collect the tax that is due and to make sure that corporations and individuals pay it wherever they are due to pay it”.

He said the government had stated its support for the minimum corporation tax rate plan and described the US proposal as a “good start” and the prospect of deal as “potentially one of the landmark moments in global corporate taxation”.

Negotiation parties to the proposals, which would see multinational corporations prevented from shifting profits across borders to exploit the most attractive low-tax locations, are hoping to secure an agreement in autumn this year.

The Independent Commission for the Reform of International Corporate Taxation has proposed a minimum global corporation tax rate of 25%. Rishi Sunak announced at the Budget that the UK level for the tax would rise to 25% in 2023.

Tax Justice UK has published research suggesting that the plan, predicated on a global minimum corporate tax rate set at 20%, would raise an extra £13.5bn a year in the UK rising to over £22bn if the level of tax is raised to 25%.

MPs also voted down Labour’s new clause 25, by 357 votes to 268, to force a review on the impact of free ports. They also rejected amendment 29, by 89 votes, to ensure large companies that have done well during the pandemic “pay their fair share”.