Finance (No. 2) Bill — House of Commons, 2021-04-20
Topic: Macroeconomics
Kevin Paul Hollinrake (Conservative, Centre-right): I absolutely accept that our tax system is very complex, and I have proposed a number of measures on the Floor of this House to try to simplify it. For example, abolishing business rates and replacing them with an increase in VAT would simplify the tax system, instead of having an online sales tax. However, in terms of this debate I do not think it is the complexity of the issues that catches people out. We can see that 99% of tax avoidance schemes in the UK involve disguised remuneration—these are very contrived schemes. We should look at amendment 77 carefully. As to whether it is unfair on a person who is a promoter of what I would say is an extremely contrived tax avoidance measure, I am not totally sold that that should be a problem One of the biggest problems we have is faith in the system. This Government have done a huge amount to reduce the tax gap, which is at a record low of 4.7%, but if there is a £20 billion tax gap from fraud, the person in the street might reasonably say, "Why should I pay my tax?" This creates an incentive then for people to look at ways of avoiding tax. As to whether tax avoidance is fraud, the Government’s own call for evidence last month says clearly: "The Government recognises that the design of arrangements that are sold as avoidance schemes may in fact enable fraud." So there is a good case for being able to take these further measures, as the Government are doing through stop notices, further civil penalties and stopping individuals hiding behind corporate structures The trouble is that, as we see in many areas, not least the banking sector, which I am pretty active in through my work in the all-party group on fair business banking, these kinds of organisations see a fine—a civil penalty—as a cost of doing business; the real deterrent for people is a criminal penalty. One of the best examples of this is to be found in a completely different sector, with the personal liability for a director in the construction industry. As soon as that personal liability came in and there was the potential for someone to go to jail if they did not make sure their sites were safe or they did not put measures in place, there was a huge decrease in the number of injuries and fatal incidents in the workplace in construction. That speaks to the point that if there are real criminal sanctions that we are willing to take forward and people think that that is going to happen, this promotion of avoidance schemes will start to drop significantly We probably have better resourced areas in terms of the prosecution of avoidance; I believe there are about three and a half times this number of people in the Department for Work and Pensions looking at benefit fraud, despite the fact that it is a much lower level of fraud—the level of benefit fraud is about 10% of that seen by HMRC. A beefing up of the resources in HMRC is therefore something we should consider. We have seen very famous schemes. I believe the Ingenious film scheme cost the taxpayer £1.6 billion, but not a single promoter has been held to account for it. We need more resources, but we should also look at legislation. This country does not have a great record on prosecuting serious fraud. There are a number of examples where the Serious Fraud Office has failed to make charges stick—I think, for example, of cases involving Tesco and Barclays. That is why the SFO wants to bring in more legislation, which the Government have agreed to do, to create a corporate offence of failing to prevent economic crime. This would be a personal sanction on the directors of a corporation that failed to do that. Of course, in banking we now have the senior managers regime that the Financial Conduct Authority put in place following some of the scandals there, when nobody was held to account for the disgraceful abuse of both consumers and businesses through the past couple of decades in the sector. The excellent Minister might say that amendment 77 is not the right vehicle for this, but some beefing up of the legislation to make it easier to prosecute fraud—criminal activity—is something that we should seriously consider.