Finance (No. 2) Bill — House of Commons, 2021-04-19
Topic: Macroeconomics
Sarah Jane Olney (Liberal Democrats, Centre to centre-left): I wish to speak to clauses 6 and 7 relating to the rates of corporation tax and also to the super deduction Businesses everywhere, of all sizes and in many different sectors, have had an extremely challenging year. As we hopefully move into a time when business as usual can return, I know that Members in all parts of this House are united in wanting to support businesses to flourish once more. But this has also been a year of unprecedented demand on the public finances. Much of that money has been directed towards households in the shape of our furlough and SEISS schemes to ensure that incomes can be sustained and, in turn, to maintain revenue for those businesses providing essential services. Many businesses have seen increases in revenue this year as indirect competitors have been forced to close or prevented from making their goods and services available. Any business that provided a digital or delivery service found an unexpected increase in demand compared with those that provided an in-person service Why should the businesses that have profited from the pandemic not pay their share in restoring the public finances that have been expended on supporting us all through this difficult time? The Liberal Democrats have called for an excess profits, or windfall tax so that those businesses that have done well can contribute their share to the recovery. This could most easily be done by an immediate increase in corporation tax whereby only those companies that have remained profitable would pay it. Instead, the Government propose a sharp rise in corporation tax in 2023. This delayed increase will give larger companies time to rearrange their affairs, potentially limiting the amount of revenue that can be captured by the planned rise. It will create an artificial boost to the economy in the short term as profits are brought forward, to be reported against the lower tax rates of the next couple of years The Government’s changes to corporation tax rates come when the global nature of trade presents a major challenge to national autonomy on tax rates. The Liberal Democrats are in favour of higher corporation tax rates to ensure that businesses are paying their fair share. The challenge to implementing this has always been that we are in competition with other countries attracting investment by setting lower tax rates. I am interested to hear how the Government plan to react to the plans by the new Biden Administration in the United States to set a global floor for corporation tax rates. This is a fantastic opportunity to introduce a fairer and more progressive tax regime in all nations and reduce the options for corporations to reduce tax. I very much hope that the Government will sign up to the Biden plan and set an example to the rest of the world The Chancellor’s most eye-catching announcement in the Budget was the super deduction available to businesses over the next two years to get back 130% of the cost of new plant and machinery. I know that this will benefit many businesses, but I fear that the impact will be more limited than at first appears. First, it creates a cliff edge in investment, especially when coupled with the tax increase in the third year. Secondly, many manufacturing businesses invest for the long term and plan their capital expenditure in 10-year cycles, so a two-year incentive will not make a big change to investment plans. Thirdly, a great deal of equipment is leased rather than bought outright, so investment incentives like these will make no difference It would have been a better policy if the expenditure recovered could have included measures to get our economy to achieve net zero carbon emissions or have included expenditure on training and development to help us to build the high-skill economy that we need. These expenses could then have been claimed by a far wider number of businesses in many different sectors and made a genuine contribution to future prosperity and green growth The Government need to be clear about their business tax policy so that businesses have time to plan and an understanding of how tax policy interacts with an overall strategy to support enterprise and productivity. Many of our business owners feel a real loyalty to their communities and will maintain those connections regardless of the tax rates, but they need to know that this continues to be a country that welcomes entrepreneurs and supports small businesses. Much more can be done in our tax system to support small and medium-sized enterprises, and I regret that the Government have not taken the opportunity to do this. The Liberal Democrats would introduce a tax cut for SMEs and quadruple the annual employment allowance to allow small businesses to employ up to five people without paying any national insurance contributions. The Government have shown a lack of commitment to small and growing businesses in this Bill and no strategy for private sector growth The Liberal Democrats oppose the corporation tax clauses in the Bill because they mean that profitable corporations are not paying their fair share as we recover from this pandemic and the overall provisions do not provide the support we need for small businesses.