Finance Bill

I think I know where the hon. Gentleman got that statistic from, and I am not sure that it is actually right. Perhaps the Minister could respond to that point. That example is often quoted, but my understanding is that it is not necessarily the case. It is right that we should have a competitive taxation system, and I am very pleased that the hon. Gentleman supports that objective. However, the concerns about whether our tax system is competitive are very strong. For example, let me quote the CBI report that was published last year. It says:""The competitiveness of British business is increasingly compromised by the UK corporate tax system. Only a few years ago the UK was perceived to be one of the most competitive places in the world to do business, underpinned by one of the most competitive corporate tax systems. Today this advantage has been significantly eroded."" Richard Lambert, chief executive of the CBI, has also described our tax system as a""ball and chain round the ankle"" of the UK economy. I could even quote the former head of the Prime Minister's business council, who warned the Government to be "extremely careful" on tax policy. It is pretty clear what he meant when he stated:""The consistency and the nature of (the tax policy) has been hugely attractive to overseas people and to companies. We mustn't lose that competitiveness. It would be very bad for the UK (and) it would be hugely damaging for business."" That head of the Prime Minister's business council is now Lord Davies of Abersoch, the Government's Trade Minister. A KPMG survey of 50 of Britain's largest businesses published in January 2009 revealed that the percentage actively considering moving their tax residence out of the United Kingdom jumped from 6 per cent. in 2007 to 14 per cent. in 2008. In fact, one of those businesses had already left the UK by 2008 so perhaps we should say 16 per cent. We have seen a number of companies relocate their tax residence out of the UK—WPP Group, Shire, and United Business Media, to name but three. Those cases were specifically to do with fear of the regime on the taxation of foreign profits. It would be fair to say that since the KPMG survey the Government have come forward with proposals that we debated at some length in Committee, and there is some support for those proposals. We raised a number of concerns and, despite the support for the proposals, the concerns remain. KPMG went back to those companies that were actively considering moving their tax residence after the Government had proposed their reforms on the taxation of foreign profits and the fact remained that all but one of them were continuing to consider actively moving their tax residence. One was waiting to see how things developed. It remains a problem, notwithstanding the announcements that the Government have made on the taxation of foreign profits. It is worth highlighting the World Economic Forum survey on global competitiveness, which addresses a number of issues including tax competitiveness, where the UK's position fell from fourth in 1998 to 15th in 2003. New clause 6 addresses a number of aspects of competitiveness, one of which is rates. Corporation tax rates have not risen but have, in relative terms, become less competitive. Our corporation tax was the third lowest in the EU15 in 1997 and the sixth highest last year. We have a higher rate than the OECD average, which was not the case in 1997. We can consider the rate of income tax. Of course, at the higher rate level of 50p, we will now have one of the highest rates of income tax in the world, not one of the lowest. There is also the issue of tax complexity. Those who debate such matters will be familiar with the fact that the UK now has the longest tax code in the world and that we have overtaken India in that respect. It is common in such debates to quote the exponential increase in the number of pages involved in tax textbooks. These are real problems that are frequently highlighted by professional organisations and business groups. I shall touch on that point again in a moment or so. There is also a lack of predictability that has affected the UK tax system, particularly in the past few years. In a run of Budgets and pre-Budget reports, announcements have been made that were not consulted on and poorly drafted legislation has been presented that has caused significant concern to business groups in the UK. The capital gains tax proposals in the 2007 PBR and the proposals on residence and domicile in last year's Finance Bill are examples of that. How do we address these fairly fundamental concerns? New clause 6 would require the Treasury to lay before Parliament an annual report on the impact on the competitiveness of the UK economy of measures in that year's Finance Bill. It would also require tax rates, the complexity of the tax system and the relationship between HMRC and the taxpayer to be taken into consideration. The advantage is that that would force the Treasury to focus on the issue of tax competitiveness, and enable Parliament to assess the Treasury's performance in that area. It would also send a strong signal to international investors and businesses about the importance that we as an institution attach to tax competitiveness. The proposal regarding the relationship between HMRC and the taxpayer would also be important in that regard, as it would mean that we all focused on ensuring that Revenue and Customs provided a service to taxpayers that worked to the UK's advantage. New clause 3 focuses more specifically on the proposal to establish an office of tax simplification. It is an attempt to address the problem of tax complexity, but it would also help with tax predictability. The OTS recommendation is one of three in the report published last year by Lord Howe, the second being a proposal to establish a Joint Select Committee on taxation that would make use of the expertise in this House and the other place to scrutinise Finance Bills and draft legislation. The third element of the Howe report is a proposal for a new convention to the effect that any change to the law with a technical content should be set out no later than the PBR before a Finance Bill is introduced. The OTS would also report to the proposed Joint Select Committee on taxation, very much as the National Audit Office reports to the Public Accounts Committee. The Howe report proposes that the OTS would be overseen by a steering committee appointed by the Chancellor. Its staff, in some respects like that of the tax law rewrite project, would be made up of a combination of people from HMRC, academics and representatives from the professional organisations and major firms, perhaps on secondment for a year or two. The OTS's role would be to examine such areas of fiscal law as seem to it appropriate and to put forward proposals for tax law. It would not express a position on rates or yield or make decisions on tax law—it is absolutely right that this House does that—but it would make recommendations.