Date: 2023-04-18
Victoria Atkins: My right hon. Friend has been very good at representing the interests of her constituents. I certainly acknowledge the significant rule that the insurance sector plays in her constituency, and, indeed, the role that her constituents play in that industry. I want to develop my argument a little, but I hope I will be able to reassure her on the points that she has raised--and I will come to the point about implementation, because I think it is important. Let me try to help Members navigate this rather large piece of legislation. Part 3 deals with the multinational top-up tax, which is introduced by clauses 121 to 131 and schedule 14 for multinational groups whose global revenues exceed EUR750 million a year. Clause 132 determines how multinationals should calculate their effective tax rate for a territory. Clauses 133 to 172 set out how multinational groups should determine their underlying profit and then make adjustments. Clauses 173 to 192 describe how to determine the amount of taxes called covered taxes paid by a multinational that should be included in the effective tax rate calculation. Clauses 193 to 199 set out how multinationals should use the effective tax rate and adjusted profit they have calculated to work out how much top-up tax, if any, is due for each territory in which they operate. Clauses 200 and 201 set out how much of the top-up tax in the low-tax jurisdiction should be attributed to the responsible members of the group. Clauses 202 to 219 set out further adjustments to deal with particular circumstances, including losses, and rules that apply an additional top-up amount where the covered taxes are less than expected. Many multinationals will include entities that are not wholly owned. This means that they need specific rules, which are set out in clauses 226 to 229. Clauses 220 to 225 set out how the rules work for investment entities, which was a key ask for the insurance sector. I am providing this level of detail at this stage to give the House a sense of just how much work has gone into this set of rules internationally and, importantly, how we in the UK have managed to influence and shape the rules before we bring them before the House in this Finance Bill. Clauses 230 to 259 provide definitions for the various terms, and clauses 260 to 264 set out general and miscellaneous provisions. The Government are also introducing technical adjustments in amendments 12 to 13 and 15 to 20. Amendment 12 will remove unnecessary duplication. Amendment 13 will ensure that tax paid that contributes to the effective tax rate is appropriately allocated to group members. Amendments 15 to 20 will ensure that the transitional rules work effectively. Part 4 of the Bill focuses on the domestic top-up tax, which will largely mirror the functionality of the multinational top-up tax but which is in itself an important measure because it ensures that multinational groups operating in the UK pay any top-up tax here on their UK profits. Without it--this is the critical point about implementation--other countries that have introduced a multinational top-up tax will collect this tax. The domestic top-up tax will also apply to groups that operate only in the UK, ensuring that all in-scope groups operating in the UK are treated consistently, preventing economic distortions. Clauses 265 to 277 deal with both the domestic top-up tax and the interplay with the multinational top-up tax legislation. I listened carefully to the scrutiny provided by right hon. and hon. Friends on Second Reading, and I want to try to answer one or two of the points raised. That is important, because this is what Committee of the whole House is for, after all. On the question of implementation and the actions of others, which my right hon. Friend the Member for Chelmsford (Vicky Ford) has just raised, the UK is not acting alone here. Germany, Spain, Italy, France, the Netherlands, Sweden, Ireland and Belgium-- indeed, the EU as a whole--are acting alongside us, as  are Canada, South Korea and Japan. South Africa, Singapore and Hong Kong are all preparing to implement in 2024 or 2025. [Interruption.] I hear chuntering from behind me, so I will break some of that down. Those countries are in the process of legislating. In fact, since we last met, Ireland has published draft legislation and Japan has enacted its laws. The House already knows that the EU has set a directive for implementation by 31 December, and we are working closely with the largest EU member states to ensure that progress is made. I know that colleagues also focus on the US, so I will spend a little bit of time on this. In 2017 the US introduced a minimum tax on the foreign income of its multinationals. It has also recently introduced a further minimum tax on the aggregate domestic and foreign income of large groups, which includes the US income of foreign-headed multinationals. The US therefore already has in place rules that operate on a similar basis to pillar two, and it has been one of the strongest advocates of developing a global standard. This means that the differences in outcomes for US businesses are perhaps not as large as some of my hon. Friends might think.