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31 October 2013

Cameron’s tax crackdown undermined as Lawson accuses him of “prancing around“

The former Tory chancellor says that the government is "getting nowhere slowly" on reducing tax avoidance by multinationals.

By George Eaton

David Cameron has long sought to present reducing tax avoidance as a priority of the coalition. While cutting taxes for high-earners (with the reduction in the top rate of inncome tax from 50p to 45p) and reducing corporation tax to the joint lowest level in the G20 (it will stand at 20% in 2015, down from 28% in 2010), he argues that the government is committed to ensuring that all pay their fair share. By ending the mass avoidance (and evasion) that existed under Labour, the Tories and the Lib Dems claim that they can raise more revenue from lower rates. 

Cameron will return to this theme today with the announcement of a new public register designed to reveal the true owners of the anonymous “shell” companies associated with tax evasion. “For too long a small minority have hidden their business dealings behind a complicated web of shell companies,” he will tell the Open Government Partnership in London. 

But the PM’s anti-avoidance drive has been undermined by an unlikely source. In a debate in the House of Lords last night, Nigel Lawson accused the coalition of “prancing around”, rather than making the changes needed to ensure that large corporations pay their dues. The former Tory chancellor warned that multinationals “shift their profits and their intangible assets around the world in such a way that they pay little or in some cases no UK corporation tax at all”, while “small and medium-sized enterprises” face “the full rigour of corporation tax”. 

He went on:

It is a totally inequitable system. So what is the government doing? Just prancing around saying we are talking about with our opposite numbers from other OECD countries and other European countries and goodness knows what.

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They love going to these conferences and they happily make statements that they have reached a great understanding and a great agreement but the problem is just the same, it hasn’t gone away.

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Lawson proposed that the government should introduce a new system with separate taxes on profits and sales to ensure that companies like Starbucks, Google and Amazon make some contribution. He said: “God forbid that the United Kingdom should take a lead and introduce a sensible tax system of its own which would probably comprise a very low level of corporation tax – tax on corporate profits – and perhaps a low level of corporate sales tax, because sales are where they are and sales in this country are sales here which we can tax here.

“But more than anything else we should be taking a lead. I have to say to the government that you are not even getting nowhere fast – you are getting nowhere slowly.”

Labour, meanwhile, has welcomed the announcement of a public register, while highlighting the rise in uncollected tax to £35bn and the failure of the government’s Swiss tax deal to raise anything close to the promised amount. After George Osborne booked £3.1bn from the agreement, it has so far raised just £440m.