Companies like Amazon and Google which move their profits overseas will be charged a “diverted profits tax” the Chancellor confirmed this afternoon (18th March).
The so-called “Google Tax” – first announced in the Autumn Statement in December and involves a 25% tax on the profits of a company which artificially moves profits outside of the UK in order to avoid paying tax - was confirmed in the Chanceller’s last budget speech before the election today.
Amazon bases its headquarters in Luxembourg in order to move profits outside the UK and avoid paying extra corporation tax and Google's headquarters are in Ireland, where the corporation tax is lower.
Chief secretary to the Treasury Danny Alexander, will reveal new legislation tomorrow (19th March) outlining new criminal offences and penalties for aiding tax evasion.
"Let the message go out: this country's tolerance for those who will not pay their fair share of taxes has come to an end,” Osborne said.
Corporation tax rules will also be changed to prevent contrived loss arrangements and tax loopholes that enable businesses to take account of foreign branches when reclaiming VAT on their overheads will be closed, he promised.The new tax measures should bring in £3.1bn to the Treasury over the next five years, Osborne said.
However, he made the pledge at the same time as announcing corporation tax in the UK would be cut to 20% in April 2015.
Since the coalition government came into power in 2010, corporation tax has been slashed from 28%. The 20% figure will mean the UK charges the lowest corporation tax of all the G7 countries.
Tax cuts were also announced for the television, film, and gaming creative industries along with orchestras, but no support was revealed specifically for the publishing industry.
“Creative industries are already a huge boost to the British economy,” Osborne said. “We make a commitment to make TV and film tax credits more generous… Britain is the cultural capital of the world.”
The Chancellor also confirmed the review of business rates will report its findings in the Autumn budget, recognising that business rates were not “keeping pace” with the rate of change on the high street.
A business rates review was revealed on Monday (16th March), welcomed by The Booksellers Association, with the consultation closing in June.
The document said: “This is the biggest review of business rates in a generation and we would urge businesses, local communities and others to get involved.
“We want to hear views from a wide range of stakeholders to ensure that the review’s outcomes are informed by a broad and open discussion and that they balance the concerns of central government, local government and business ratepayers.”
The chancellor also announced greater powers for Manchester, which will get an elected mayor with the devolution of power, transport and health budgets, among others. As part of these plans Manchester and Cambridge will be able to keep 100% of the sum raised by a growth in business rates “as we build up the northern power house,” Osborne said.
Deloitte has predicted this will raise an extra £1.35bn for the city. The same deal has been offered to Cambridge and the Chancellor said his “door is open” to discussions with any other councils.