Ministers advised against ‘blindly’ pushing on with global corporation tax plans

Tory MPs Priti Patel and Sir Iain Duncan Smith raised concerns as the Finance (No. 2) Bill was considered in the Commons.

Britain was signed up to the deal by Prime Minister Rishi Sunak when he was chancellor (Kirsty O’Connor/PA) (PA Wire)

Tory MPs have cautioned the Government against “blindly” implementing an international agreement to prevent corporation tax falling below 15%.

Conservative former cabinet ministers Priti Patel and Sir Iain Duncan Smith were among those seeking further clarity on the impact of the changes, amid calls for the implementation date to be pushed back.

The Government offered to provide updates to MPs and said the UK retains the “sovereignty to set our corporation tax rate”.

Britain was signed up to the deal by Prime Minister Rishi Sunak when he was chancellor, in a move brokered by the Organisation for Economic Co-operation and Development (OECD).

Why are we now going to surrender powers to the will of the OECD?

Former Cabinet minister Priti Patel

The measures are expected to come into effect from the end of 2023 and are designed to ensure major companies pay their fair share wherever they do business.

The Finance (No. 2) Bill helps pave the way to introduce the OECD Pillar Two rules into UK law.

Ms Patel, speaking during the Bill’s report stage, called for greater scrutiny to examine the “complexities” of the policy and to assess what the UK’s competitors are doing.

She told the Commons: “There’s no point just saying we need to crack on and implement this, we have to do it in the right way.”

Ms Patel added: “Without labouring the point too much, we have left the EU, the Government does have the ability to make its own tax laws and fiscal sovereignty is absolutely crucial to this as well.

“Why are we now going to surrender powers to the will of the OECD? But actually along with economic growth, we don’t want to undermine our ability to be a low-tax global beacon of free trade.

“The Government is pursuing policies such as freeports, we all welcome this when it comes to competition, but we don’t want to be encouraging a culture of subsidies, which is of course, this policy will do.”

Ms Patel went on: “By baking this into primary legislation a requirement for us to implement without any further flexibility, we do risk blindly signing up to a package where foreign officials could overrule decisions and interpretations in our own jurisdiction and our own Government.”

Conservative former leader Sir Iain Duncan Smith said Ms Patel’s “compromise” amendment to amend the date was seeking to give the Government more time to “think carefully” about what it is doing.

He said: “Particularly because the Americans are almost certainly not going to implement this, which means the single largest trading nation in the world will not play a part on this.”

Ms Patel said she would not move her amendment after she received “very, very clear assurances” from Chancellor Jeremy Hunt that he will bring “regular updates on what the OECD is proposing with regards to policing Pillar Two” to the Commons.

She added the Government has pledged to bring forward ahead of the summer recess some “detailed assumptions and modelling” on the expected tax revenues from Pillar Two.

We retain the sovereignty to set our corporation tax rate

Treasury minister Victoria Atkins

Treasury minister Victoria Atkins earlier said the global tax agreement protects against large multi-national groups and companies using “aggressive tax planning and shifting their UK profits overseas”.

On the concerns raised by Ms Patel, the minister said: “The Chancellor and I are happy to provide an update on Pillar 2 implementation as part of the forthcoming fiscal event in the autumn and if necessary, in the spring, too.

“This update at the fiscal events mentioned will include the latest revenue forecasts from the OBR (Office for Budget Responsibility). That’s an important point I think, and a status update on international implementation.”

On sovereignty, Ms Atkins said: “We retain the sovereignty to set our corporation tax rate.

“It is still the lowest in the G7 and we can use important tax levers to boost investment including the UK’s world-leading R&D credit and full expensing regimes announced in the Budget.”

The Bill as a whole enacts measures contained in the Spring Budget.

It later received an unopposed third reading and will undergo further scrutiny in the House of Lords at a later date.

Ms Atkins said: “It takes forward measures to support enterprise and grow the economy by encouraging business investment and helping to increase employment.”

For Labour, shadow Treasury minister James Murray said the Bill “could have been a chance to make the tax system fairer” as he spoke of the “vicious cycle of stagnation”.

He added: “A fairer tax system is desperately needed after 13 years of low growth and stagnant wages and after 25 tax rises by the Government in this Parliament alone, increases that have pushed the tax burden in this country to its highest level in 70 years.”