The Stroud MP’s weekly column.
Reform of the global tax system to ensure tech giants pay more has been led by the UK ahead of the G7 summit taking place in Cornwall later this week.
This is a move that has widespread support. For many years people in many countries have been angry because tech companies get away with not paying enough tax despite making billions in profits.
What has happened is that tax has not kept up with the digital age. To tackle it, finance ministers from the G7 wealthiest nations have struck a deal. It means multinationals will have to pay a minimum tax rate of at least 15 per cent in each country they operate.
Many digital businesses like Amazon, Google and Facebook, are enormous but only declare relatively small profits in each country they operate in. This new deal will affect them and force them to pay more where they operate and where they are headquartered.
The 15 per cent minimum corporation tax is designed to prevent countries having low corporation tax and companies moving business there. G7 leaders will now discuss the proposed deal.
This matters to all countries because it means more tax for public services, which is much needed right now following the pandemic. The Government’s finances are in a parlous state and this will help.
But I do not think tax reform should stop there. I would like to see an overhaul of UK business rates so that internet retail will pay a fair share compared to bricks and mortar retail, which is suffering. As I said, tax has not kept up with new digital business models. This is a big step forward. I hope it gains consensus within the G20 group of countries too and becomes the global benchmark. There’s some way to go but this is a good start for a fairer global tax system.
It will take some time for a tech tax to start coming in and there are constant calls for massive spending in areas like education, social care, mental health, the NHS backlog – among but a few! Given the need for spending here and the fact that the economy has had a massive shock from the global pandemic, you can see why the Government has made changes to the foreign aid budget on a temporary basis while still sending more aid than many countries. Tough decisions have to be made and they will need to be made for many years to come.
I am disappointed there is no bid from Stroud District Council going into the Government’s £4.8 billion Levelling Up Fund this year. It is up to the council whether they apply and if so, what for but I have been concerned for some time that a bid would not come to fruition. The Government has encouraged all constituencies to apply for up to £20m and neighbouring areas have put in strong bids.
We know that there are some fantastic ideas and plans for improving Stroud that could benefit from Government investment, particularly as we need to focus on creating jobs as we recover after the pandemic.
I hope there will be serious effort to create a meaningful bid for next year working with businesses and all councils.