F7: Business Tax Reform - Fair for Business and Fair for Society

12 members

Mover: Chris Davidson.

Summation: Martin Wheatcroft.

Conference believes that the existing business taxation system in the UK, and globally, is not fit for purpose and needs reform because it is:

1. Too complicated and onerous to administer.
2. Too easily circumvented.
3. Too unstable.
4. Ill-equipped to ensure a fair contribution by multinationals and those operating in the digital economy; and sometimes unfair, perverse and irrational.

Conference further believes that the UK should work with other major economies to develop a global system of international business taxation that ensures all businesses contribute to the societies in which they operate, based on the following principles:

1. Businesses should pay tax.
2. Businesses should be taxed on profits.
3. Businesses should be taxed equitably.
4. Taxes paid should be fairly allocated between jurisdictions, with businesses operating in the UK paying tax in the UK.
5. Businesses should pay a single fair rate of tax on profits.
6. Businesses should not be able to reduce their effective rate of tax on their profits to zero.
7. The tax calculation should be straightforward.
8. The tax system should be stable, with sufficient time for consultation and implemention whenever changes are necessary.
9. Productive investment should be encouraged.
10. Incentives should be targeted and provide value for money.
11. Taxes should be transparent.

Conference acknowledges that international reform will take time, and that reform of the domestic business tax system is necessary in the meantime. Conference therefore resolves that we need a balanced system of business taxation in the UK that supports long-term enterprise and investment, that ensures businesses fairly contribute to the physical, legal and social infrastructure they rely on, and that shares the burden of paying for public services between businesses and individuals on an equitable basis.

Conference rejects Conservative plans to turn Britain into an unregulated tax haven and calls for a return to a corporation tax rate of 20 per cent, reversing the rate cut to 19 per cent and the planned reduction to 17 per cent, which are not necessary for international competitiveness and are an unjustified tax giveaway.

Conference further rejects Labour's plans to increase corporation tax rate to 26 per cent, a penal increase that would undermine investment, reduce wages and employment, and harm Britain's attractiveness as a good place to do business.

Conference notes with concern Conservative plans to establish up to ten new so-called free ports in the UK, creating tax-havens that increase unfairness in the tax system and undermine public finances, and which were also identified as potentially vulnerable to counterfeiting, VAT fraud and money laundering in a European Commission report published on 24 July 2019.

Conference calls for the replacement of corporation tax with a new British business tax that is fair to business and fair to society, based on the above principles and including the following features:

1. A long-term stable rate of tax on business profits, with a predictable future path of tax policy; this would be of much more benefit to business than a lower rate and the current approach of continual tinkering, with fewer changes in business taxes allowing more time to think each change through properly, more time for proper consultation, and more time for implementation.
2. A simpler tax system, making it easier for businesses to comply and for the government to administer, with lower administration costs, reduced opportunities for tax avoidance, and more resources devoted to tackling tax avoidance and tax evasion; there should be a simpler tax calculation based on accounting profits with a minimal number of adjustments.
3. Reformed place of establishment rules to ensure that all businesses operating in the UK pay tax in the UK on those operations, restricting the ability of multinationals to unfairly shift profits out of the UK to low tax jurisdictions; public utilities and outsourced providers of public services will be prevented from attributing profits made in providing public services in the UK to other jurisdictions.
4. A new standardised approach to incentives to eliminate opportunities to artificially manipulate the tax system and ensure established profitable businesses cannot reduce their taxes to zero, while expanding support for early stage businesses to help them grow into successful enterprises and generate future prosperity.
5. A business tax system that encourages (rather than discourages) investment, with simplified capital allowances, an increase in the Annual Investment Allowance ensuring that the overwhelming majority of businesses obtain tax relief for productive investment immediately, and higher Writing Down Allowances to encourage more investment by the largest businesses.
6. Greater transparency, with clarity over the cost of tax incentives provided to business and with large businesses required to disclose the taxes they pay in the jurisdictions in which they operate (as recommended by the OECD).

Applicability: Federal.

Mover: 7 minutes; summation of motion and movers and summation of any amendments: 4 minutes; all other speakers: 3 minutes. For eligibility and procedure for speaking in this debate, see page 4.

The deadline for amendments to this motion - see page 6 - and for requests for separate votes - see page 3 - is 13.00 Monday 2 September. Those selected for debate will be printed in Conference Extra and Saturday's Conference Daily.