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Good afternoon, and thank you to the organisers of the Securities Industry Conference for inviting me to speak at this year鈥檚 event.

As a minister in a department dealing with one of the biggest tasks of all 鈥� turning round the national economy 鈥� it鈥檚 always a pleasure to talk directly to the people involved in making prosperity happen.

We must not forget that rising living standards and well-funded public services depend upon a thriving business sector. And a government that engages and listens to business is a government much more likely to deliver the conditions you need to create wealth.

I鈥檝e been asked to speak about current trends and future objectives in business taxation in the UK.

So the first trend I would like to highlight 鈥� and this will not come as a surprise 鈥� is a laser focus on competitiveness.

In a global world, tax competition is not something a government can duck or pretend doesn鈥檛 exist. Particularly the government of an open economy like the UK鈥檚.

And competition has intensified in recent years. The average corporation tax rate among OECD countries fell from 32% in 2000 to 25% in 2011.

The government set out our ambition to make the UK corporation tax regime the most competitive in the G20.

We wanted a tax system that supported economic growth and investment.

And we have made real progress. Since 2010 we鈥檝e cut corporation tax from 28% to 21%. Next year it will fall to just 20%, giving the UK the lowest rate of corporate tax in the G20.

To spur innovation, we鈥檝e introduced the Patent Box 鈥� about which I鈥檒l be speaking more later on 鈥� and the 鈥榓bove the line鈥� tax credit for Research and Development.

We鈥檝e cultivated a generous environment for oil and gas exploration.

We鈥檙e supporting the creative sector through tax reliefs on video games and high-end television and theatre.

And these reforms have not gone unnoticed. Successive business surveys have reflected their positive impact on the UK.

We鈥檙e highest in the KPMG鈥檚 annual survey on international tax competitiveness 鈥� two years in a row.

And Ernst & Young consider us the most attractive location in Europe for global investors 鈥� particularly in knowledge industries and business services.

In an HMRC survey this year, 9 in 10 businesses said the corporation tax cuts had been good for the UK鈥檚 competitive position.

And, as proof, UKTI has reported that the UK attracted more inward investment projects last year than in any year since records began in the 1980s: 1,773 projects, creating 66,390 new jobs.

Of course, the tax reforms are just one plank 鈥� albeit a central one 鈥� of our broader economic strategy. And that strategy is working:

• the IMF say the UK will grow faster than any other major G7 economy this year
• employment is at record levels
• business confidence is high
• business investment is picking up rapidly

So we鈥檝e taken great strides to make the UK more competitive and better equipped for the global race.

And 鈥� although I鈥檇 be wrong to say that the job was anywhere near done 鈥� we have begun to see the results of that action.

The message I鈥檇 like you to take away today, therefore, is that the government is committed to making the UK as competitive an environment as possible.

Rightly, the question we continue to ask ourselves is this: How can we make the UK even more competitive? Because I tell you one thing 鈥� in the world we live in, no country can afford to take their foot off the pedal.

The second trend I would like to highlight is an increased public focus on the tax affairs of large companies 鈥� more specifically, the tax they pay. Fairness is the buzzword here.

At a time when countries are facing difficult fiscal positions and taking difficult decisions on spending, and at a time where households up and down the country are having to mirror those difficult decisions in the financial choices they make, it should not be a surprise that voters are angered by stories of companies not paying tax.

The Chancellor has previously highlighted the government鈥檚 concern about some digital businesses paying little or no tax on profits made in the UK.

Our message is clear. Our side of the bargain is that we will keep taxes as low as we can 鈥� and we鈥檙e delivering on this.

The flip side, however, is that businesses need to actually pay those taxes.

Because we want Britain to be a low tax country where people play by the rules.

And I鈥檓 pleased to say that the UK is the first of 44 countries to formally commit to implementing the new country-by-country reporting template.

We believe that country-by-country reporting will improve transparency and help identify risks for tax avoidance.

In time, improved transparency between business and tax authorities will also help developing countries in dealing with compliance, as they often lack the capacity to collect this information themselves.

Reporting high level information using a standardised format across all jurisdictions will ensure consistency, give tax authorities the information they need and minimise the additional administration burden on business.

The UK government wants an international tax system with simple and fair rules that ensures all companies pay their share. And that requires action at an international level.

We shouldn鈥檛 really be surprised that the current international tax rules need reforming. They were first developed nearly a century ago.

And we need to change them so they continue to support free trade and ensure a level playing field for businesses. But also to address weaknesses where 鈥� for example 鈥� multinationals can use cross-border business structures or finance transactions that exploit differences between two countries鈥� tax rules.

So driving forward reform on the international stage is another priority area for the UK.

That鈥檚 why we鈥檝e taken a lead role so far on the international stage through the Base Erosion and Profit Shifting 鈥� or BEPS 鈥� project which seeks to address tax avoidance.

And that鈥檚 why we鈥檒l continue to work through the G20 and OECD to make sure that this area is properly reformed.

And that work can be broken down into four key areas:

• first, the digital economy, where we鈥檙e looking at the challenges posed by those businesses that operate primarily online
• second, coherence, where we鈥檙e looking to ensure that the interaction of domestic tax regimes doesn鈥檛 create unforeseen gaps where business can pay no tax at all
• third, on substance, where we鈥檙e looking to better align taxation with economic activity
• and finally on transparency, where our work is focused on ensuring that tax authorities have all the information they need for risk assessment purposes.

I鈥檓 pleased to say that we鈥檝e now completed phase one of the BEPS project, with our international partners in the OECD and G20 reaching agreement on seven reports of the 15 actions last month.

But there is no time to relax.

The UK will continue to work collaboratively with our international partners to take forward the recommendations from the 2014 reports and tackle the 2015 Action Plans.

And it goes without saying that the UK will continue to ensure that the financial sector鈥檚 requirements 鈥� specifically, regulatory requirements 鈥� are taken in to account in the BEPS project. We will be working closely with the sector to achieve this.

While we are focused on BEPS I would like to set a couple of things straight on the Patent Box鈥�

The Patent Box was introduced to encourage innovation and to bring high value science and technology jobs and investments to the UK. It also ensures that the jobs that are already here will stay here.

This policy has been widely welcomed by businesses, and the evidence of growth is already clear.

GlaxoSmithKline has attributed to the Patent Box its additional investment of 拢500 million in manufacturing in the UK, along with the creation of 1,000 new jobs and he construction of a new factory.

They have gone as far as to say that the Patent Box has 鈥渢ransformed the way [they] see the UK as a place to invest鈥�.

And pharmaceutical companies aren鈥檛 the only sector set to gain from this. Engineering, life sciences, manufacturing, technology, and defence are all sectors who will see a positive effect from the patent box.

The UK economy will see a positive effect as a result of that.

I reject any suggestion that the UK鈥檚 Patent Box facilitates profit shifting. Let me be clear here: categorically, it does not create an opportunity for businesses to reduce their taxes without increasing their value to the UK economy.

To gain the advantages of the Patent Box, a company must either have developed the IP itself, or actively manage the commercial exploitation of the IP. This is a substantial amount of activity for a business to undertake.

If all a business wanted to achieve was to shift their profits in order to receive a lower tax rate, then this simply would not be worth the hassle.

For this purpose, a business can find other countries鈥� regimes offering lower rates with less activity required.

Although many countries have supported the nexus approach as set out recently by the OECD in its update on the BEPS Action Plan, there has been no consideration of its feasibility or proportionality. We have raised a number of issues that we feel require further attention.

First, we have serious concerns about the nexus approach鈥檚 compatibility with EU law.

The restrictions on eligible expenditure could influence the location of business activities within the EU and therefore infringe the freedom of establishment.

Furthermore, by dictating the qualifying commercial structure, the nexus approach is also overly restrictive. This presents significant difficulties for businesses which are not engaged in profit shifting.

It is also inconsistent in its principles. It does not allow acquisitions from third parties, although third party outsourcing is allowed. Introducing these sort of false distinctions could distort commercial decisions.

Considering these complexities, it is not surprising that nexus also requires incredibly detailed tracing of expenditure and income.

This would be a heavy burden to place on businesses and tax authorities.

The UK鈥檚 view preference is for well-understood and accepted transfer pricing principles.

These offer a more practical and proportionate way to define the 鈥渟ubstantial activity threshold鈥� that will also fall in line with the OECD鈥檚 BEPS Action Plan.

The process to gain an internationally recognised definition of 鈥渟ubstantial activity鈥� is long and ongoing.

The UK is fully engaged with the OECD鈥檚 Forum on harmful tax practices and the EU code of conduct group in order to achieve a clear definition鈥�

And for the various reasons I have spoken about today, we believe our approach is the most practical.

The approach we are taking here reflects the government鈥檚 commitment to defending the UK鈥檚 interests when it comes to policies which we believe will hurt growth and jobs, at a time when we should be doing everything we can to support the economic recovery.

A prime example is the Financial Transaction Tax, proposed by the European Commission last year, and being taken forward by 11 EU Member States.

The government believes that this flawed tax would be damaging to employment and damaging to economic growth. We will not be participating in it.

Not only that, but in our view, the proposed Financial Transaction Tax is unlawfully extraterritorial.

As you will know, we took a protective legal challenge to the ECJ [European Court of Justice] to ensure our rights as a non-participant are respected.

We continue to engage closely with this proposal and the Chancellor has been clear 鈥� if the final proposal does not address our legal concerns, we will not hesitate to launch further legal action.

Because the government will always stick up for the industries which create this nation鈥檚 prosperity. Including those within this square mile.

It鈥檚 now been over four years since I first walked through the doors of HM Treasury as a Minister.

Four years of tough choices 鈥� I know, Andrew and his colleagues have quizzed me about many of them. I still bear the scars鈥�

But I鈥檓 confident that the government has taken the right decisions to create a competitive tax system that encourages growth and investment.

Do I believe that our work is done? Absolutely not.

But we are making concrete progress. There鈥檚 a lot of work to come internationally, and I鈥檓 well aware that there will be real challenges ahead.

But I鈥檓 confident that we are on course to creating a tax system that is competitive and robust and fair 鈥� an environment where countries can compete.

This will be good for individual jurisdictions, good for the public and good for the vast majority of businesses.

Thank you for listening, and I鈥檒l be very happy to take any questions.