I am going to break off from the EU exit series for a couple of days to deal with taxation, as there is an ill informed topical debate underway about it. I am publishing this blog for tomorrow early this week-end as some Sunday journalists may find it helpful.

There are two major judgements involved with reaching a fair tax settlement for successful multinationals. The first is where was the profit made, given that they incur costs and earn revenues in various countries. Some of them, for example, chose to establish their headquarters – and therefore incur substantial costs – in Ireland as Google has. They go there partly because Ireland has a much lower rate of Corporation Tax than other European countries. The UK cannot complain about that, as the UK’s own company tax strategy is to cut our rate so we attract headquarters and other cost bases from higher tax countries. We want the employment and investment, and would like companies to export from the UK around the rest of their group. When the company earns revenue in the UK it can of course offset the UK costs against the revenue, but it can also claim that some part of the costs it incurs elsewehere, as in Ireland with its headquarters, can also properly be taken off its UK revenues before striking a profit. The amount is a judgement which its own accountants, managers, auditors and the competing tax authorities all have to consider.

The second related issue is transfer pricing. Where a good or service produced by a multinational incurs production costs in more than one country the company is allowed to set transfer prices for the semi finished good or contribution to the service from country A into country B where the good or service is finished or delivered. Again a judgement is involved, as these are often just internal prices. In my simple model where just two countries are involved both countries tax authorities have an interest. Each will want the highest possible transfer price for their part of the work and the lowest for the other country’s, to maximise their part of the total profit so they can tax it. A company would like the profit to be highest in the lowest tax country, but all reputable companies will want to strike a fair price as they understand the morality of doing so. They also understand that to be able to persuade the tax inspectors in both countries concerned the fairest price should have the most chance of meeting with approval. In practice many countries may be involved where activity happens in plenty of places and contributes to the final good or service.

Google’s view of these issues – and its other judgements on where profit was made – led to a very low tax assessment in the UK from 2005 onwards which the then Inland Revenue accepted. In 2009 HMRC initiated an enquiry to see if it could challenge the way the UK profit was calculated. This enquiry was clearly a complex one, as it has only just resulted in the Revenue making a new determination of Google’s tax and Goggle having to pay considerably more as a result. This was not some political fix between a Conservative Chancellor and his big business pals. Ministers do not get involved in individual company tax calculations, do not see the details of a company’s tax submission or the Revenue response and are not allowed to interfere in an enquiry. Ministers do have to debate celebrated cases if the media and opposition pick up on them, but not on a basis of study of the individual tax account. Ministers do have to form tax policy, uphold or amend the law as necessary and be prepared to defend the results of tax law. The Revenue advises Ministers in general terms on what change is needed or how to defend against criticisms in the light of their detailed experience of the current law in individual cases.

What conclusions do I draw from this saga? Firstly, I support tax competition between countries and do not blame Ireland for setting a lower rate and for attracting headquarters and other costs as a result. Our taxation of a multinational that does have an Irish headquarters has to allow for the legitimate activity that such a location decision requires. It will mean some of the tax we would like to place on profits from UK revenue will pass to the Irish authorities or is not a profit at all. The Chancellor is right to respond to this part of the problem by lowering our rate so we can attract more taxable activity from other higher tax jurisdictions.

Secondly various loopholes in rules over where revenue and profits can be booked needed to be closed. This Chancellor has closed 40 such loopholes which allowed companies legitimately to avoid tax in the last decade which they cannot do now. The Chancellor has sought to deal with the overall problem through his attack on the diversion of profits by multinationals. He was right to take action to tackle profit diversion and if he needs to take further action I am sure he will next budget. Each budget sees the Revenue put forward proposals to deal with the latest legal schemes to divert profits to lower tax jurisdictions or to reduce reported profits by taking advantage of legal tax abatements.

Some on the left seem to think large multinationals are the super rich and all we have to do is to demand more money from them. We live under a rule of law in a competitive world. Those who want multinationals to pay more tax need to come forward with thought through amendments to our tax law which would achieve their aim without losing us the jobs and business. This argument is mainly about where profits are booked and which country therefore gets the tax, so where we seek change it is to repatriate profits from neighbours. In part it is also about tax taking a larger share of revenues. In some cases that may be a good idea, but we need to remember that company revenues are also needed to reward employees and to invest in the future. Multinationals, like many individuals, wish to minimise their tax bills by all legal means.

Let me conclude by dealing with conspiracy theories before they are written. I have no personal financial interests in Google or any of the other majors under scrutiny for paying too little tax. I have not even met the management of Google. Before writing this article and before appearing on Any Questions where I thought the issue might emerge I contacted Google so I could understand in general terms the way their tax bills since 2005 were first agreed and then subject to revision. I do have an interest in more healthy business and jobs in the UK, and understand that striking the right tax balance is not easy. This Chancellor has succeeded in getting more tax out of these companies than his Labour predecessors without so far losing business and profit to other countries as a result of his corporate tax policy. That is a win.

A fundamental principle of democracy is that one government and Parliament cannot bind another.

To ensure the power of the people voters need to be able to dismiss a government that does not please and replace it with one that does. Any law, decision or spending priority that needs changing should be capable of change following an election.

Now we are in the EU there are many areas where UK voters cannot change policies by voting or through the pressure of public opinion.
An incoming government in many areas has to say we cannot change that law, that expenditure, that way of doing things, because it is set out in EU laws, regulations and directives.

A new UK government cannot make many changes to our energy policy to pursue cheaper energy, cannot set our welfare policy as we wish, cannot police our borders as we choose, thanks to EU laws.

The UK was signed up to Nice, Amsterdam and Lisbon, three centralising EU Treaties, by the last Labour government. The Conservative Opposition opposed all 3 for good reasons. We were not able to change a single clause in them once elected to office.

Greece has shown just how broken and damaged a democracy is when you sign up to the Euro as well as the rest of the EU laws. Greek voters discovered they can no longer change economic policy, however bad the existing one may be.

The UK has also signed a way a lot of her power of self government. The UK too is being taken on a wild ride to political union. EU law making and budget setting is incompatible with UK democracy.

THOSE WHO WANT TO STAY IN ARE IN DENIAL ABOUT HOW MUCH POWER HAS GONE

They either say little has gone, or they say we are stronger if we “pool” our sovereignty.

It is simply wrong to deny the transfers when you see the thousands of pages of laws and Treaty clauses we are signed up to.

And it is wrong to say we are more powerful because we have one voice in 28 around the table.

Does our Prime Minister look powerful, rushing round the EU begging for changes to our welfare system which we can longer do for ourselves? It’s our money, but they tell us how to spend it.

THE UK WILL BE MORE INFLUENTIAL WHEN IT LEAVES THE EU

Out of the EU the UK will regain her rightful place on world bodies. The UK will reclaim her own seat at the World Trade Organisation, in World Climate talks and similar fora.

Instead of having to broker a line with 27 other countries, the UK will in each case be able to form her own opinion and to advance it directly.

The UK will be free to make her own trade treaties with the USA, China, India and other leading countries. During 43 years in the EU the EU has failed to negotiate trade Treaties with these and other countries, and prevents us from doing so on our own.

The UK will retain her seat on the Security Council of the UN and her leading role after the USA in NATO.

The UK’s defence will continue to be assured by our own armed forces and by the NATO support.

Rule making for trade and related matters worldwide now occurs through world bodies. The UK does usually has to allow the EU to sit on these bodies instead of us. Out of the EU we will have our own seats on these organisations, and will have a more direct say in the world standards and rules that affect us.

Far from neglecting or ignoring us, out of the EU France and Germany will be keen to negotiate our support and agreement to various initiatives they will lead in the EU. We will have more influence over any common policy because we will effectively have restored our veto.

OUR OPPONENTS WILL CLAIM THE UK WILL LOSE INFLUENCE IF WE LEAVE

They ignore the fact that many decisions in the EU are now taken by majority vote, where the UK can easily be outvoted.

They are unable to explain how the UK can both influence central EU policies and stay out of the Euro which increasingly drives decision making in the EU

They claim the UK would have to adopt all EU rules outside the EU. This is simply not true. Outside the EU the UK would not have to adopt any EU rule it disliked for domestic or rest of the world activities. It would only have to adopt a requirement of the EU in order to sell a good or service to them, just as we have to accept customer requirements wherever we sell in the world.We meet US standards to sell to the USA, our biggest external market, but do not need to join their political union to do so.

They claim the UK will be sidelined outside the EU. On the contrary. EU states will want UK support for EU initiatives in the world. The rest of the world will take the UK more seriously once it returns as a full voting member to the main world bodies where it currently shares a representative with the other 27 countries of the EU.

When the UK leaves the EU it will carry on paying all the current grants to farmers.
We will have our own money to spend, and will have all the money we had to send to the EU to pay for our farm subsidies back under our own control.
A Conservative government will guarantee existing subsidy levels and will discuss with farmers if they need more or if they want the money paid in some different way.

Outside the EU the UK will be free to buy more of our own food in the UK without the problems of EU procurement laws.

We will be free to adopt modern technologies and innovations we think will help farmers and their customers.

The UK will regain her seat on The International Plant Protection Convention, and will have a stronger voice in combating plant disease worldwide.

OUR OPPONENTS WILL CLAIM WE WILL LOSE SUBSIDIES AND INFLUENCE

They are wrong on both counts.
We will have more of our own money to spend, and will guarantee current subsidy levels

We will have much more influence when we can say what we want and make our own decisions, instead of having to live with compromises with 27 other countries as our official view.

FISHING
Out of the EU the UK will regain control of our fishing grounds.
The Common Fishing Policy has done huge damage to our fish stocks and has allowed factory ships from the continent to come and take so much of our fish. A UK domestic policy could be more successful at husbanding our fishing grounds and giving priority to UK vessels. Norway, Iceland and Canada show how.

The Common Fishing Policy ranks alongside the Euro and the common energy policy as one of the great disasters of the EU, costing us jobs and environmental damage on a large scale.

ENVIRONMENT

Outside the EU the UK will be able to set her own environmental standards, and reward farmers and landowners for looking after our precious landscape and allowing others to enjoy it.

The UK will also be free to modify the water and planning laws which have assisted flooding and got in the way of good water management.

The Water Directives have worsened flood problems.

The UK can have a rural policy that looks after rural areas and is sensitive to UK needs.

OUR OPPONENTS CLAIM THE UK OUT OF THE EU WILL INTRODUCE LOWER ENVIRONMENTAL STANDARDS

That is not the intention of the current Conservative government. Parliament will be free to set higher or more effective standards if it wishes.

ENERGY

One of the most damaging policies the EU has visited upon us is dear and scarce energy. The UK needs to be free to have its own energy policy based on domestic security of supply and lower prices.

EU energy policies are pricing energy intensive industry out of the UK, and also damaging the cost base of general industry. The UK has lost large amounts of capacity in aluminium, steel, ceramics and other basics.

The renewables requirement encouraging dependence on wind energy has left the UK with expensive intermittent sources, which require going to the great cost of building back up stand by power.

More use of interconnectors to the continent makes the UK more dependent on a continent short of energy and itself reliant in part on Russian gas, which contains considerable political risk.

Freed of the EU obligations the UK could develop more of its indigenous energy sources, rely more on gas and fuel efficient coal stations, and deliver more cheap energy to business and households.

Instead we import more goods made using coal based power that is cheaper abroad. It does not save on the CO2 but costs us more in other ways.

Dear energy is creating more fuel poverty and necessitating higher welfare payments.

OUR OPPONENTS WILL CLAIM WE NEED JOINT WORKING WITH THE EU TO BE SECURE

The opposite is true. The continent is energy short, reliant on dear interruptible renewables and Russian gas.

Our best security is to develop our own energy, with our own nuclear and reliable renewable technologies, and with domestic energy sources for conventional power stations.

TRADE

Outside the EU the UK will have more scope to sell to the rest of the world, will be able to draw up its own free trade agreements with other countries, and will see its balance of payments deficit cut by the ending of EU contribution n payments.

The £10 billion the UK contributes to the EU every year which it does not get back is on fifth of the forecast balance of payments deficit for next year.Stopping those payments would be a great boost to our overseas account.

The UK needs free trade agreements with China, India and the USA, but has been prevented from having them through EU membership.

The UK will be able out of the EU to influence standards and rules governing goods and service sector trade, by regaining seats on international bodies the EU took from us.

The decision to leave will send a clear signal that the UK is dedicated to the wide world, not just relying on its adjacent continent.

We will be able to rebuild stronger trade and investment links with the Commonwealth and the English speaking world.

OUR OPPONENTS WILL CLAIM TRADE WILL BE DAMAGED AND THE UK WILL BE LIKE NORWAY

Our trade is not at risk. The German government has made clear they do not want to impose new tariffs or other barriers to trade if the UK leaves. After all, they sell us twice as much as we sell them, so new restraints would be damaging to Germany.

Our leading car makers Nissan, Toyota and Jaguar Land Rover have all said they will invest in new models and remain committed to the UK whether we are in or out.

The UK will not do a deal like Norway. When you run as large a deficit as we do with the rest of the EU there is no need to pay anything into the EU to keep the trade going.

Nor will the UK be on the wrong end of fax rules and regulations. The UK will return to making our own rules and regulations, and to having more influence on world standards.

£10 billion is a lot of money each year. That’s the sum we send to the EU and do not get back. That’s around £300 a household every year going to subsidise relatively rich countries on the continent.

One of the main questions in the referendum is how should we spend this Brexit bonus?

The cautious will say let’s reduce the deficit by not spending it.

The adventurous who want more growth will say let’s all have a Brexit tax cut, so we individually get to spend it because we pay less Income tax .

Those worried about the costs of health, schools and social services will say let’s boost our caring and educational services with some more spending.

The important thing is to open this debate. It’s good for morale to be discussing a better financial picture than the current one. It will remind all in the debate of a very positive large gain from exit.

We also need to ask the Stay in campaign what they think is going to happen to our contributions if they win.

Recent years has shown remorseless pressure and changes of the rules and methods of calculation to get more money out of us. How much more are they going to demand?

How does the UK stay out of meeting some of the costs of economic failure in parts of the Eurozone? Wont we be expected to contribute to economic regeneration and recovery plans for the countries plunged into long term austerity by the Euro?

We can of course spend the £10 billion and still give exactly the same amounts to farmers, universities etc the the EU currently gives them as well.

OUR OPPONENTS WILL CLAIM WE WILL HAVE TO PAY SOMETHING OUTSIDE THE CLUB

We need to remind them that most of the world trades quite successfully with the EU without paying a penny or a cent into EU funds.

There is no need for the UK to pay anything for the privilege of importing so much from Germany.

Starting this morning I am going to write a series of summaries of why we should leave the EU, taking a topic at a time.

The UK today can decide how many people to allow in to work and live from outside the EU, if they come directly.
The UK cannot control how many people come to live and work here from EU countries, and cannot control all those coming from outside the EU who come via another EU country.

Most people in the UK want controlled immigration.

Outside the EU the UK could have a fair system, placing identical limitations on people coming from the EU as from the rest of the world.
The UK seeks to limit non EU immigration. We favour students, people with skills our economy needs, people with money and ideas to invest, and people with sufficient money to pay their own way.
These limitations are designed to keep the extra costs of public service under control, and to allow in a manageable number of people.

In recent years the UK has experienced very high levels of inward migration. This has required providing many more homes, school places, NHS capacity, transport capacity and other public facilities. It has helped fuel high rises in property prices in the most popular areas of the country. It has provided a plentiful supply of labour, with an impact on wages and on people already settled here getting out of unemployment. For these reasons the current government was elected on a pledge to cut net migration to tens of thousands.

To keep its promise the government will need full control over policy. It will need to impose new restrictions on EU migration which are not legal under the current Treaties. Nothing in the renegotiation will make it legal to do what is necessary.

OUR OPPONENTS WILL CLAIM THAT THE REFORMS OFFERED SOLVE THE PROBLEM

Gaining more control over welfare benefits to limit these to new arrivals will not be sufficient to hit the government’s target on net migration. The main attraction of the UK to migrants from the rest of the EU is the availability of jobs. This will be enhanced by the introduction of the living wage, which is relatively attractive to migrants from the lower paid areas of the EU and from the areas of high unemployment.

Others on the Stay in side welcome unlimited migration. They see the plentiful supply of new labour as an advantage, rather than putting in the apprenticeships and starter jobs for UK citizens which we need.

I have received the enclosed letter from Sir Peter Hendy, Chairman of Network Rail:

Dear John,

Thank you for our recent meeting.

I was pleased to read your subsequent blog in which you call for the modernisation of the rail network with digital technology to release more capacity from the existing infrastructure. I agree wholeheartedly.

Other industries, from aviation, to roads and the London Underground, have already unlocked significant additional capacity through digital control systems. We are hitting the limit of analogue signalling faster than other countries in Europe because of our successful growth – over 40 per cent of the EU’s officially declared ‘congested railways’ are in Britain.

This is why our Chief Executive established a discreet digital railway programme 18 months ago to bring the required pace to modernising the network. We are currently building the business case for the digital railway that will demonstrate the business benefits for the country. In additional we are developing a rolling programme of digital modernisation of traditional command and control signalling.

This is a time of unprecedented growth on our railway. Beyond critical upgrades and projects now planned or underway, a national capacity strategy that is rooted in conventional enhancements would cost too much, disrupted for too long and would deliver too little.

Digital technology will change the way we operate and manage our network. It could create up to 40 per cent more capacity on the most congested urban networks, while making trains more reliable, safer and our network far more resilient to disruptions. This incremental capacity can be unlocked at significantly less cost and with massively less disruption, than building new railways in dense urban centres.

It is not a question of whether we transform our signalling technology, but when. Plans exist already, but they are small and will mean that Britain will not see the full benefits for many decades. Network Rail believes that the country cannot wait that long. We already have brought together parts of railway delivery and planning into an integrated Digital Railway programme, with the aim of bringing forward and maximising the benefits of digital capacity.

We are currently building the business case for the Digital Railway that will demonstrate the business benefits to Britain.

It is important that the Leave campaign stays focused on the big issues that matter. These are

1. We get our money back, bringing both the trade and current account deficits down by a fifth
2. We gain control of our borders.
3. We gain control of our own laws.
4. The UK regains places on the main world bodies it has lost to the EU, and becomes more influential in the world.
5. Our trade is not at risk, and we will be able to negotiate free trade deals where we wish.

The negative and unpleasant Stay in campaign wishes us instead to talk about

1. The Norwegian way – as if the UK had to pay loads of money to the rest of the EU once out for the right to buy all their exports!
2. Who leads the Leave campaign – to cover up for the poor media start of their campaign. We do not need a single leader, but a range of faces and voices.
3. Which senior figures sign up for the Stay in campaign – usually people who were wrong on the European Exchange Rate Mechanism and wrong on the Euro in the past.

We need to brush these nonsenses aside and concentrate on the big picture. The style of the Stay in campaign shows they have no belief in the structure and policies of the Euro driven EU, and wish to talk about anything apart from the centralising direction of their chosen international body. You rarely hear them saying anything positive about the Euro, about common borders, about political union, about business regulation and all other main features of the organisation they wish us to remain in.