Robert Palmer: To support the levelling up agenda, the Government should follow Biden’s plan to tackle corporate tax avoidance

19 Apr

Robert Palmer is the Executive Director of Tax Justice UK.

Few issues annoy Conservative voters more than Facebook, Google and other global companies paying ultra-low levels of tax in the UK.

Whether it’s pensioners, Brexiteers, Red Wallers, people with degrees or those who failed to get a single GCSE, polling shows that they all unite in frustration at companies that avoid their obligations on tax.

Conservatives like Kevin Hollinrake, the MP for Thirsk and Malton, and Anthony Browne, who represents South Cambridgeshire, understand these frustrations. Companies like Netflix have been hauled over the coals in parliament, with MPs across parties demanding it explain why it paid so little UK tax.

Netflix, famous for box sets like The Crown, hit boom times during the pandemic. Even before Covid, the entertainment tech giant booked £860 million in subscriptions from UK customers alone via its Amsterdam-based subsidiary, but paid very little tax here. MPs are understandably concerned to make sure the likes of Netflix pay a fair share in the UK.

In a parliamentary debate last year, Browne said: “What any fair-minded person objects to is aggressive tax avoidance which results in companies or people paying less tax than is clearly their fair share.”

In its 2019 manifesto, the Conservative Party pledged to continue to lead “the international fight against aggressive tax avoidance and offshore tax havens”.

Last week President Joe Biden announced a plan that could end the “race to the bottom” on corporate tax. It comes just a month after Rishi Sunak pledged in the March Budget to increase corporation tax to 25 per cent by 2023.

The US President is proposing that companies should pay at least 21 per cent on their profits as part of a package of global reforms. This would make it much harder for global companies, like Amazon, to get away with paying very low rates of tax by stashing their profits in offshore tax havens.

Far from stifling UK businesses, the Biden plan would give companies a chance to compete fairly against the global giants and their clever accounting.

Areas of the UK that lost out under globalisation, could reap the rewards from the overdue reform of the way global multinationals are taxed. There’s nothing buccaneering about keeping our antiquated global tax system in place.

Research shows that the plan for a global minimum corporation tax could raise £13.5 billion a year in the UK.

Raising corporation tax is popular among Conservative voters and the rest of the voting population. Bringing in more money from companies is also compatible with the levelling up agenda.

The centre-right think tank Onward, recently called for the Government to level up the tax system. Its research highlights that corporation tax receipts are concentrated in the wealthy South East of the country. This is partly skewed by the fact that many companies are headquartered in London. However, even with this factored in, over the last decade the corporate tax take has declined in the North and Scotland, while it has risen in the South.

Red Wall voters are desperate to see investment in their communities. The £13.5 billion that could be raised through adopting Biden’s plan, much of it likely to be paid by tech giants, would help us invest in things like broadband to bridge the gap between rural and urban areas.

It’s clear that the Conservatives’ new electoral coalition is more left wing on economic issues. This is in part driven by increasing support in the Red Wall constituencies in the North and Midlands. These voters want to see higher levels of public investment and support tax increase to help deliver this.

So far there’s been some indication that the UK government is interested in the idea of a global minimum corporate tax rate, but won’t yet sign up to Biden’s proposed 21 per cent rate.

On Wednesday, the Treasury Minister Lord Agnew responded to a question in the House of Lords about Biden’s plan from the Green Party’s Baroness Bennett. The Minister said that “the UK was at the forefront of initiating global action on international tax”. He backed global efforts to reform the global corporate tax rules and said that the Treasury was looking at the US proposals.

In June, Johnson will show leadership to the world as the UK plays host to the world’s richest countries at the G7 summit. Getting global agreement for a global minimum corporation tax will be near the top of the agenda for the US President.

The 2013 G8 summit in Northern Ireland saw a Conservative-led government push through a global agreement to tackle tax evasion and avoidance. Those changes have made a real difference and ended some of the more egregious practices.

A G7 summit in our own backyard will be front page news in the UK. It’s in this government’s interests to support President Biden’s plans to tackle corporate tax avoidance. This would be good politics given the popularity of cracking down on tax loopholes and the billions that could be raised to support levelling up.

Robert Palmer: Taxing wealth would put Sunak on the right side of public opinion

10 Sep

Robert Palmer is Executive Director of Tax Justice UK.

We are living through deeply unusual times. However, at least one thing has remained constant in Westminster – the swirl of leaks and counter-briefings in advance of the autumn budget. Much of this is political theatre with various factions jockeying to influence tax and spend decisions.

The Chancellor is facing some tough calls. In the long run, the “levelling up” agenda will require extra spending. Tax rises are on the cards, and Rishi Sunak’s room for manoeuvre is limited by manifesto pledges not to increase income tax, VAT, or national insurance contributions.

The latest big newspaper splash claimed that the Treasury is considering a suite of higher taxes on the well off. This news was met with incredulity from many Conservative backbenchers, who argued that any such changes would choke off the economic recovery and would go down badly with voters.

On the first point, the critics are right. Tax rises in the middle of a recession are generally a bad idea, with almost all economists pointing to cheap borrowing and Quantitative Easing as the best way to “pay for Covid”.

However, Conservative MPs are out of step with public opinion on the popularity of higher taxes on the rich. My organisation, Tax Justice UK, has teamed up with Survation and the University of Sheffield to carry out a major public attitudes research project, based on 11 focus groups and two polls.

The results are out today: we found 74 per cent of people want the wealthy to pay more tax. Almost no one is calling for tax cuts.

We found that Conservative voters have shifted in favour of tax rises during lockdown. The proportion of Conservatives who said they were personally prepared to pay more tax to support public services went up from 41 per cent to 46 per cent between our March and June polls.

A Conservative supporter in Hastings said: “I would pay more tax if I could see real change – education, minimum wage, cost of living, less poverty.”

Our research also shows that Sunak would get strong backing for the measures he’s rumoured to be considering in the forthcoming budget. We tested attitudes towards aligning capital gains tax (CGT) with income tax, increasing corporation tax, and cutting pension tax relief for higher earners. Voters were in favour of all of these ideas.

But what’s even more interesting is that during lockdown Conservative support for these reforms has increased dramatically. For example, Conservative backing for higher corporation tax leaped from 61 per cent in March to 74 per cent in June. On increasing capital gains tax rates to income tax levels – last done under Margaret Thatcher – Conservative support jumped from 58 per cent in March to 67 per cent in June.

In fact, our polling shows that on a whole range of wealth taxation reforms, Conservative voters are more likely to back higher taxes than the general public.

One Conservative voter in Wrexham told us, “if someone earns over a certain amount their tax should be increased. Not the average Joe who is just trying to live.”

While people backed higher taxes on the better off, voters believe that having wealth is key to providing security for themselves and their families. For this reason, language that was seen as anti-aspirational, or bashing the rich, went down badly.

These findings reflect the new coalition that Boris Johnson was so successful at crafting at the last election, with big wins amongst working class voters and in traditional Labour heartlands. Research has found that Conservative voters are relatively “left-wing” on economics, while lean right on cultural issues. This is particularly true amongst those who voted Labour in 2017, but switched to the Conservative party in 2019.

In this political context, raising taxes on wealth would be the smart thing to do. Sunak and Johnson could point to their manifesto commitment to “end the arbitrary tax advantages of the richest people in society”. Perhaps this time round, it’s the Conservative backbenchers opposed to tax rises who don’t reflecting the public mood.