The UK Must Back a Global Minimum Corporation Tax

Read Kate’s latest article for Labour Outlook.

In the Queen’s Speech earlier this year, the government had the opportunity to set out a plan to build a fairer, healthier, greener Britain. Instead, the Chancellor, Rishi Sunak, has chosen to continue down the path of further inequality and insecurity by writing off the tax liabilities of huge multinationals like Amazon and Google. These big-tech firms have made huge profits during the pandemic and now the Government is enabling them to hide their money from the citizens that have sustained them.

The Government’s plan to rapidly increase corporation tax after many years of cutting has meant that they have been forced to introduce incentives like the so-called ‘super-deduction’. The Chancellor’s ‘super-deduction’ incentive is not the innovative idea that he may like to portray – it will make no difference to investment in the long run – all it does is change when businesses will decide to invest rather than encouraging them to invest more.

The ‘super-deduction’ is not targeted at British businesses who have been struggling, it is targeted at multinationals like Amazon and Google who will be able to use it to write off their entire remaining UK tax bill. Given the tens of billions that the treasury will lose through this tax cut, it makes it even more confusing as to why it has not been possible to find the smaller sums required to give NHS workers a well-deserved pay rise.

It is essential that the income from wealth is taxed at the same level as income from work and that multinationals like Amazon & Google are forced to redistribute their huge profits into our communities by paying their fair share of tax. In 2019, research from the IPPR found Taxing income from wealth the same as income from work could raise £90 billion over five years. Multinationals paying their tax doesn’t just result in more spending on our public services – it means British firms who pay tax here won’t be undercut by companies like Amazon who are able to shift profits overseas to take advantage of very low rates of corporation tax elsewhere.

The online shopping boom that sprung from the Covid-19 lockdowns has led to Amazon creating more than 1,300 jobs at a newly created fulfilment centre in my constituency.  Whilst job creation in my constituency is welcome, reports of Amazon fulfilment centres with no Covid-19 safety measures, no social distancing, no PPE or hand sanitiser and a continuation of gruelling productivity targets have been common here in the UK and across the globe. Large corporations should not be entitled to tax-breaks at the best of times, let alone at a time of national crisis and when they fail to even allow their workers the right to join a Union without fear of reprisal.

The Government must understand that nothing angers the British public more than multinationals like Amazon, Google and others paying ultra-low levels of tax. If this Tory Government are serious about their levelling up agenda then it makes no sense that last week they voted down Labour’s proposal for a global minimum corporation tax, a plan that would stop big businesses like Amazon from dodging billions of pounds worth of tax.

After a year in which many big tech firms have done well, we need to do better and move beyond our outdated global tax system. As a bare minimum, the UK must follow the Biden administration’s call for the introduction of a global minimum corporation tax rate. This means a minimum rate of 21% over the next two years rising to 25% in 2023. Tax Justice UK estimate that if the rate is set at 21%, it will mean approximately £13.5 billion each year coming back to Britain.

A globally set minimum corporation tax rate doesn’t just mean more money being made available to fund our public services, it will also prevent countries undercutting each other, depriving themselves of tax revenues at a time when every country needs to repair its economy. A universal minimum rate of corporation tax will also bring an end to tax havens and avoidance more widely.

The UK is hosting the G7 meeting in June, and as it stands the UK government is the only one among G7 that is unwilling to challenge global corporate tax avoidance. How can the Tories justify this when our country needs all the money it can get and when decent British businesses are being undercut by competitors paying 0% in tax havens?

Now is the time that the UK Government began to take a lead in supporting the plans for a global minimum corporation tax so we can build an economy fit for the future, with thriving industries, and good unionised jobs for all.