The principles for governing tax have barely changed in 100 years. Now's the time.
On Saturday, I was in Moscow at a meeting of G20 finance ministers, putting international tax avoidance on the agenda. Globalisation and technology have brought about huge changes in the way businesses operate. Communication is faster than ever. Finance is more mobile than ever. And the value of companies is increasingly tied up in concepts such as brand and intellectual property, which do not observe country borders.
Despite this, the principles governing tax for multinational companies have barely changed since they were developed by the League of Nations almost a century ago. As a result, some large multinationals are able to restructure their business to avoid paying their fair share in tax. Some are exploiting the rules by getting profits out of high tax countries and into tax havens, allowing them to pay as little as 5% in corporate taxes while smaller businesses are paying up to 30%. This distorts competition, giving larger companies an advantage over smaller domestic companies. People are rightly asking for something to be done.
I want competitive taxes that say Britain is open for business and to attract global companies, with all the jobs they bring. That's why we're cutting the corporation tax rate from 28% to 21% the lowest in the G7. But I am also clear that global companies should pay those taxes.
For the full op-ed, go here.