'If taxes are low, it's only fair to ask businesses to pay'

Last Updated: Sun, Feb 24, 2013 06:42 hrs

Question: Mr Prime Minister, my question pertains to taxation. In recent weeks – perhaps in recent years – there is a growing expectation both internationally, including in your country and in ours, where stakeholders have been raising claims on companies for a greater payment of taxation. There's also an expectation from governments, including ours, that many companies will contribute more to taxation. So, my question to you, sir, is, what is your brief to business leaders? Is taxation to be treated as a cost of doing business and, therefore, the minimisation of which is in some sense a legitimate business pursuit? Or, is it an appropriation of profits which - which, therefore, as business leaders you must take pride in maximising and sharing with governments and stakeholders and all of you. What is your position on this subject?

Prime Minister: Well, my position is taxation is a part of the cost of doing business, but I think if you like, there's a deal. And the deal in my country, I want to be very frank about, is you have a government that is cutting the levels of business taxation. We are cutting the level of corporation tax (tax on company profits) down to 21 per cent; that is a good, low, competitive rate. And I think the message to business should be: if we are cutting this rate of tax down to a good, low level, you should be paying that rate of tax rather than seeking evermore aggressive ways to avoid it. And, I think, there has been a problem in this debate in the past in that people have said, well, of course, there is a difference between tax evasion, which is illegal and should be pursued by the full force of the law, and then there is tax avoidance, which is perfectly legal and okay'. And I think the problem with that is, there are some forms of tax avoidance that have become so aggressive that I actually think there are moral questions that we have to answer about whether we want to encourage or allow that sort of behaviour.

Now, of course, some would say we'll just keep changing the law to make the aggressive avoidance illegal, but with respect to friends in the accountancy profession – and I have many friends in the accountancy – it is difficult to do that. So, I think there's a legitimate debate to say a very aggressive form of avoidance is not appropriate, and particularly in a country that's set a low tax rate... it is fair to ask people to pay it.

But I think there's a very important international agenda here, which is about greater transparency. Countries that want to develop, that need to have good public services, they need to have a tax base. They need to be able to raise legitimate tax revenues. And we won't see the sort of development we need in our world unless they have a good tax-base; that means more transparency, more information sharing between countries and making sure that there are fair rules of the road - for governments to obey, but also for businesses to obey. And Britain is chairing the G8 this year, and I want there to be a real debate about how we have greater transparency, greater fairness, so that people pay their share. But I believe in low taxes. The government should be trying to get the rates of tax down, so that they're competitive, but then I think it's only fair to ask businesses to pay them.

Question: Sir, this is your first visit since 2010. So, in terms of expectations from India, is there any changes in terms of, say, economic policies and ease of doing business and attitudinal shift?

Prime Minister: Yes, that's a very good question. Look, I think as these partners of choice – which I hope we'll be: Britain and India in this special relationship, as I put it – I think we should both be asking ourselves what more can we do to take the barriers down and to increase the opportunities. So, in Britain, we have looked at the issue, for instance, of students and said we must have no limit on the number of students that can come. We've looked at the issue of visas where we do already grant nine out of ten visas that Indians seek to come to Britain, but we know that businesses would like a faster service, so we are going to introduce a same-day business visa service. We've looked at the issue of technology, where Indian companies and the Indian government say to us, We'd like you to share more high-tech goods with us', and we're rewriting the rules to help that happen.

And Britain is one of the most open, easy to invest in economies anywhere in the world. We are incredibly welcoming. I'm very proud of the fact that it is an Indian company, Tata, that makes the Jaguars and the Land Rovers that are taking the world by storm. They also roll most of our steal, and own Tetley tea, and you don't get any more British than Tetley tea, so I'm very proud of that. Britain's an open economy and we encourage that investment in. So, I think, in return, we should be having a conversation – which we'll have this week – with the Indian government about opening up the Indian economy, trying to make it easier to do business here, allowing insurance and banking companies to do more foreign direct investment into the Indian economy. There are still many rules and regulations in the Indian economy associated with how you did things in the past, which we think, if you change, will make your economy grow faster, will deliver more jobs, more wealth, more prosperity across your country. So, I think it's a good conversation to have, but it goes both ways. We should look at the things we need to do to take our barriers down, and we hope that your government will do the same.



Excerpts from a question-and-answer session addressed by Britain Prime Minister David Cameron in Mumbai, on February 19


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