Minimum global corporate tax rate would help save high street retailers – Andrew Morrison
Critics said placing such a floor on corporation tax in the developed world would open the door for other countries to undermine the UK, potentially costing thousands of jobs.
Those who looked forward to the constitutional changes wrought by Brexit also wondered why, having achieved the freedom of the European Union, would we then bind ourselves to something so rigid and restrictive?
But there’s no doubt in my mind that for small businesses across the country, this is a hugely encouraging development and one that will help them when they’ve never needed it more.
Finally, the independent coffee shop will have a hand in competing with the global brands with which it sometimes shares a street. Small bookstores will be able to retaliate against the colossal impact that online retailers like Amazon have had on their bottom line.
Competition is healthy, everyone recognizes that, but minimum standards must be set.
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It is utterly unfair that multinational corporations that trade in various jurisdictions can set up their tax affairs to pay significantly less tax than the small businesses with which they share a market.
It would be impossible for a single downtown merchant to claim that he does business elsewhere; they are completely tied to the established corporate tax rates in this country, and almost all comply with them with goodwill and honesty.
Nor can they depend on the economies of scale that allow large corporations to sell their goods cheaply.
There’s a point to be made that consumers benefit from cheaper books and coffee – it’s free trade after all.
But how would those customers feel when every small business in their area was pushed to the wall and, suddenly with no competition, the big names indiscriminately hiked their prices?
The same consumers also benefit from the minimum standards that such a corporate tax agreement can usher in. This includes better consumer protection rights, fire safety standards and product design standards.
Establishing these minimum levels is vitally important and explains why they were discussed at length during the Brexit negotiations, notably in the now infamous case of chlorinated chicken.
By setting these benchmarks, consumers at home and abroad know that when they buy a UK made product, it will be reliable, durable and value for money. Even in the age of the gig economy, that still counts for something.
It should be remembered that setting corporation tax at a minimum level of 15% (some argue very convincingly that it should be higher) does not preclude a government from being flexible elsewhere in the tax system.
Considerable breaks can be granted to all sorts of industries and on a number of matters of economic importance.
Research and development tax breaks – for those who have invested in creating something unique – offer deep discounts not only to scientists with test tubes and white coats, but to any company that can show a element of trial and error in their new development.
Film and production tax credits and “super deductions” for those who invest in plant and machinery are also good examples of a tax system designed to get things moving.
Of course, the immediate financial impact of this on large companies operating in the UK and paying their taxes here fairly and proportionately will be negligible.
Corporate tax is currently at 19%, so any global baseline still has a bit of a way to go before it hits the coffers here.
But if all the other countries were brought up to that level, maybe more big names would settle down properly here in the UK and pay their dues accordingly.
And let’s not forget the well-being of our town centres, towns and villages.
Highly valued businesses occupying high streets will not be able to survive further surges in e-commerce.
These stores and cafes have suffered more than most from the pandemic, even those that have managed to branch out or take their first cautious steps into online commerce.
Politicians on all sides agree that it is primarily the responsibility of government, local and national, to implement policies that preserve and improve high streets.
Ensuring that these hard workers play on the same tax playing field as their Goliath rivals would be a good place to start.
Over the past 16 months, governments around the world have spent record sums to economically support traders and workers during the pandemic.
Different countries have adopted different systems but, overall, there has been agreement that the state must dig deep to protect those whose livelihoods have been cut short.
This sets the stage perfectly for further collaboration as the global economy recovers and will help combat abuse of tax systems, evasion and fraud.
By cracking down on these issues, while making it more difficult for tax havens to operate, the global marketplace will become easier for small and medium-sized businesses to access.
This is why implementing a global minimum corporate tax is not only economically productive, it is an ethically correct decision.
Following the unprecedented investment in job retention programs, not to mention the costs to health systems from coronavirus treatment, testing and vaccination, there will be heavy bills to pay off.
It is patently wrong that the wealthiest companies in the world, owned and run by the wealthiest people, can participate in a tax system that means they pay nothing like their fair share.
As someone who works in finance, it may be against my instinct to call for tax increases. But as someone who represents small business, I also know what a boost such a decision would bring to the field.
Andrew Morrison is Director of MCC Accountants