1. What does fair business taxation look like in a digital world?
Chair: Ray McCann
President, CIOT
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2. What does fair business taxation look like in a digital world
What does fair business taxation look like in a digital world? Conservative Party Conference fringe event Paul Johnson @PJTheEconomist
What does fair business taxation look like in a digital world?
© Institute for Fiscal Studies

3. What does ‘fair’ mean when applied to business?
Concepts of ‘fair share’ apply more naturally to people
87% of tax is handed to government by business, but all taxes are ultimately paid by people
Corporate tax comes from the incomes of shareholders, workers &/or consumers
Taxing large companies is not synonymous with taxing rich people
How else to judge a corporate tax system ?
Does tax give some firms a competitive advantage?
Are digital companies being advantaged by lower tax rates?
How does corporate tax distort where firms choose to locate profits and real activities?
What does fair business taxation look like in a digital world?
© Institute for Fiscal Studies

4. Corporate tax is quite simple ...
Allocation based on users is really hard
Allocation of corporate tax receipts is hard
Corporate tax is quite simple ...
Parent company
Production subsidiary
Intellectual property
Customers
What does fair business taxation look like in a digital world?
© Institute for Fiscal Studies

5. Where do we go from here?
Everyone agrees the current system has problems
No single ‘right’ answer to the question of where value was created; harder with digital
Firms have incentives to shift profits & activities (can create real distortions) & governments have incentives to compete
But fairness doesn’t offer a criteria that helps allocate corporate tax
Taxes based on residence of HQ, location of subsidiaries, where value is created, location of consumers could all be argued to be fair
A practical way forward is to try to reduce distortions (including to competition)
Keep adding patches (to general system & specifically for digital)
But don’t expect that to lead to a surge in UK tax revenues or fix all competition issues
Or move to a system that has fewer problems
Destination based corporate tax has merits: consumers are less mobile than businesses, investments or profits; removes incentives for firms shift activities and for governments to compete
What does fair business taxation look like in a digital world?
© Institute for Fiscal Studies

6. What does fair business taxation look like in a digital world?
Claire Hooper, EY Tax Partner, Chair of CIOT Corporate Taxes Committee
What does fair business taxation look like in a digital world?
Corporation tax is levied based on where businesses create value, but what does that mean in today’s world?
Are the government right to be considering a revenue-based tax for digital companies?
Is an international solution likely?
Join us to discuss these and wider issues around business taxation.
Rt Hon Mel Stride MP, Financial Secretary to the Treasury
Robert Courts MP, Chair of the All Party Parliamentary Group for small and micro business
Claire Hooper, Tax Partner, EY, and Chair of CIOT Corporate Taxes Committee
Paul Johnson, Director, Institute for Fiscal Studies
Chair: Ray McCann, President, Chartered Institute of Taxation
In a speech in Westminster Hall on March 27 Robert spoke about the role of Government being to help to level the playing field, to make sure that small businesses are able to compete with the large multinational companies on the internet. I anticipate he will say something similar at our event.
Given we have four speakers is it realistic to ask speakers to try to keep their opening remarks to no longer than eight minutes?

7. Fair tax? Clear rules with certainty of treatment
Everything that should be taxed is taxed but no double taxation
Same treatment for taxpayers in the same situation
Concern that global digital businesses have advantages over
Traditional businesses
Domestic business
In addition to fairness, also need consider if the tax is efficient, effective, sustainable and collectible

8. Cause of the perceived problem ?
Tax avoidance?
Centralisation → long term sustainability of tax base?
Issue with interaction with other taxes?
Public perception?
User-created value not recognised in current rules?
Changes required to treatment of intangibles?
Result? Lack of consensus on problem
Source: Autumn Budget 2017

9. Some of the key options being considered
Tax based on user created value
Revenue based tax
Digital PE and change profit allocation
Changes to taxation of customer intangibles
Minimum tax
Is this a fairer approach to tax ?

10. Next steps OECD Inclusive Framework Group European Union
More work to be done on nexus and profit allocation
Final report in 2020 / progress update in 2019
European Union
Hoping to reach agreement by the end of the year
Possibility of sunset clause
Meanwhile more unilateral action likely
More unfairness at least in the short term ?

11. What does fair business taxation look like in a digital world?
Robert Courts MP
Chair, APPG for Small and Micro Business
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12. What does fair business taxation look like in a digital world?
Rt Hon Mel Stride MP
Financial Secretary to the Treasury
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13. What does fair business taxation look like in a digital world?
Ray McCann Chartered Institute of Taxation
Rt Hon Mel Stride MP Financial Secretary to the Treasury @MelJStride
Robert Courts MP APPG for Small and Micro Business @RobertCourts
Claire Hooper EY & CIOT
Paul Johnson Institute for Fiscal Studies @PJTheEconomist
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