George Osborne was never going to go wrong in announcing moves to take more money off Machiavellian multinationals and the pantomime villain banks in his Autumn Statement. It is pushing at an open populist door. Tax avoidance is legal, unlike tax evasion, but has become a lightning rod for controversy in these tough times.
Equally, the Chancellor’s launch of a review of business rates south of the Border was always going to play well with small firms that see the tax, as Churchill saw Russia, as a riddle wrapped in a mystery inside an enigma.
Osborne’s elegantly entitled Diverted Profits Tax tackles head-on the sharp practice of multinationals like Google and Amazon making sizeable profits from their business in the UK but then paying minimal tax by artificially billing that economic activity outside these shores.
One piece of analysis showed that seven American technology giants paid just £54 million in UK corporate taxes in 2012.
Osborne said that closing down the grey area for taxation smoke and mirrors by multinationals will raise more than £1 billion over the next five years – a useful, if not great, amount, but is also helpful in defusing the indignation of the electorate and in dispelling any idea that Britain is a soft touch for international accounting legerdemain.
Similarly, the further clampdown on banks. Currently, they can legally offset all their losses from the financial crisis against tax on profits for years to come, meaning some of them wouldn’t be paying tax for up to 20 years.
That cannot be morally right, given the public lifeline that lenders got in the 2008 crisis from either direct taxpayer bailouts, the liquidity pumped into financial markets by central banks, and implicit state guarantees of banks deemed “too big to fail”.
The Chancellor is now capping the amount of profit in banks that can be offset by losses to 50 per cent, and delaying relief on bad debts, meaning banks will contribute almost £4bn more in tax over the next five years. An ethical nettle firmly grasped.
Lower down the business slopes, one of the most welcomed announcements in England and Wales was a continuing cap on business rate rises at 2 per cent again next year, plus a review of the whole distorted, onerous business rates system.
Even though business rates in Scotland have been devolved to Holyrood since 1999, and the Scottish Government’s Small Business Bonus Scheme has provided a clear fillip to the sector, small business organisations are right to have called for at least a similar rate cap next year and a parallel Scottish review of a sometimes bewilderingly outdated and much-hated tax.
My hunch is that a resurgent SNP will comply, for fear of otherwise losing public relations brownie points on such a vexed corporate issue by appearing to have let Westminster steal a march on it.
No such dichotomy north and south of the Border, thankfully, on Osborne’s extension of the Funding for Lending scheme for another year, to focus exclusively on smaller firms. All will benefit, wherever based.
In the wider picture, sterling did well in the currency markets yesterday, touching a three-week high against the euro.
This seemed to be a case of the markets responding well to raised near-term growth forecasts from the Office for Budget Responsibility cited by the Chancellor in his speech, and his promise to “stay the course” on public finance deficit reduction.
Overall, it was an assured performance ahead of May’s general election.
Food price fall threat to supermarket sweeps
More evidence the squeaky trolley of deflation is pushing down supermarket aisles. The British Retail Consortium yesterday said food prices fell 0.2 per cent in the year to November – the first such annual fall since it began collecting data eight years ago.
It follows official data showing food prices have been falling since July. Deflation, rising competition, changing shopping habits: an indigestible cocktail in the sector’s overloaded bagging area.
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