---

Finance (No. 4) Bill

It is common ground on both sides of the House to support the patent box; in fact, I seem to recall the Labour party scrabbling to take the credit for the Chancellor's implementing it. Let me come to the next part of my list. Every multinational should be required to publish an effective rate of tax paid on UK revenues—from UK sources, from UK territory and from its UK trade. No Government contract should be awarded to any company that does not pay a fair share of tax in the UK. We need to get tough on multinationals that have taken us on a free ride by using conduits such as Ireland, Luxembourg, the Netherlands or other European jurisdictions for too long. As a former tax lawyer—a poacher turned gamekeeper —I hope that the House will allow me to put forward some proposals for how to change things. The first is to reform the branch tax rules. Amazon will claim not to be here at all—““We're in Luxembourg,”” it will say—yet it fulfils its obligations here and trades here. The truth is that Amazon does business here. In the internet age, we need to widen the branch tax rules to deem a branch for UK-source profits to be in a UK territory. I hope that Treasury Ministers will consider that. Then let us look at restrictions on deductions such as interest, royalties or management charges—all sorts of costs that are loaded on to companies and declared as deductible items, but then end up mysteriously in Ireland, Luxembourg or one of these other countries. That method is routinely used to depress UK profits. We should pursue substance over form. We should employ ““look-through”” rules, so that no deduction should be allowed unless tax is actually paid somewhere else. Companies will claim, ““Oh, we're using the Luxembourg tax treaty,”” but we have to ask whether the tax is actually paid—that is, is it repatriated to the states where it is actually paid? Invariably, the answer is no. We need far stronger and tougher ““follow-through”” rules, to follow through the money chain and see whether genuine deductions have been made or whether companies are just using a money box offshore to rip off not just our system, but the states in their home jurisdictions. Often, they do just that. Next, we should look at how the rules on personal service companies can be tightened up. As I said in an intervention on my hon. Friend the Member for Gainsborough (Mr Leigh), politicians should be setting an example. Indeed, there are too many Members of Parliament with personal service companies—lately on the Opposition Benches, I have to say—who have not been behaving properly, but who should behave properly and pay a fair share of tax. When Ken Livingstone is not weeping crocodile tears, he is busy talking about how everyone else should pay tax but him. That is unacceptable. We need some truth, some reality and some leadership in our tax system. We should not just lecture everyone else, but act differently ourselves. We have had too much acting and too many actors; we need more reality, more substance, and more honesty and straighforwardness with the electorate. We also need to reform the European Union or renegotiate the procurement and discrimination rules, so that we can properly secure our tax base. The way the European Union has systematically colluded with multinationals to undermine our tax base—costing us even more money than we already have to give it every year, in a big fat cheque that we write out for membership of that organisation—is nothing short of a scandal. We need the European Union to be our partner in ensuring that all companies pay a fair share of tax, not just in the UK but across the EU. We need the European Union to step up to the plate in these difficult times and fulfil its responsibility to help re-secure national tax bases—rather than undermining them—not just for our nation, but for all nations across Europe, which are pretty much all running deficits. Finally, the principle that I am following is that business should pay a fair share of tax. This is about social justice as much as change and reform of the law. The fundamental deal in the tax compact is this: ““A lower rate of corporation tax and lower business taxes, but no playing the system. Take corporate social responsibility to include taxation. Pay up and help us grow the economy and repair our deficit.””