Finance Bill — House of Commons, 2017-09-12
Topic: Macroeconomics
Christopher Laurie Malthouse (Conservative, Centre-right): I, too, congratulate my hon. Friend the Member for Moray (Douglas Ross) on his fantastic exposition. I know that he is a Member of Parliament, but he is obviously also an unpaid advocate for VisitScotland. I will do my best to visit his beautiful part of the country, having had a fantastic February half-term there just this year I also congratulate the hon. Member for Liverpool, Walton (Dan Carden), who is not in his seat, on his maiden speech. He and I were brought up about a mile and a half apart. We obviously had fairly similar experiences of the city we both come from, but we have gone different ways in politics. I am slightly older than him, so I guess that I experienced the Liverpool of the hard left and he experienced the city where the hard left had broadly been expelled and that had started to recover. Having heard his speech, I think perhaps the hard left is back, but I nevertheless welcome him to his place. Before I start, I draw the House’s attention to my entry in the Register of Members’ Financial Interests. I am a small business founder and owner, and my business will be affected by some of the measures in the Bill. I am happy to say that it will no longer be affected by Making Tax Digital. I offer my thanks again to the Financial Secretary for his reasonable and sane approach to the revision of that policy My right hon. Friend will know that I ran a low-level campaign to advise the Government of the error of some of the measures they had put into Making Tax Digital early on. Frankly, I am pleased to see that the parliamentary system worked: the Government proposed something; Members scrutinised it and opined upon it; the Treasury Committee, on which I sat and still sit, issued a report on the policy; and the Government listened to lots of industry groups and amended the policy to one that was roundly and warmly welcomed by industry generally. That is the way things should work and I am very pleased that they have in this particular instance I am pleased to hear the Minister announce from the Dispatch Box that the scheme, although delayed, will now be open for voluntary participation. I assume that will also be the case for corporation tax purposes, and not just for VAT. The new measure applies only to VAT, but the Government, I think, are going to consider including corporation tax from 2020. It might be sensible to allow companies to participate on corporation tax earlier than 2020, so that the system could operate like the old self-assessment system did when it came in. That was entirely voluntary for the first few years until 60% compliance was achieved, when it then became compulsory for everybody. Notwithstanding that people always grumble about paying their taxes, the transition was pretty smooth and seamless. It is now an accepted part of the tax landscape, as I hope Making Tax Digital will be in the future One area the Government might think more about in the next two or three years as they move towards greater implementation of the scheme, is the notion of quarterly reporting, in particular for corporation tax. As I have said in the past, VAT quarterly reporting is a relatively simple exercise for the vast majority of businesses. They do not need advice on a quarterly basis to compile their VAT returns—it is a simple calculation. Corporation tax, however, is an entirely different exercise of deep complexity and, frankly, fear for a lot of companies. No one communicates with the Inland Revenue on corporation tax unadvised. This is where the problem exists, because the compliance cost of corporation tax, particularly for small businesses, is extremely high. The Federation of Small Businesses estimated that the compliance cost for Making Tax Digital would be about £2,500 to £3,000, even for the very smallest companies. For medium-sized companies, it can run into the tens of thousands of pounds just to make sure they get their corporation tax calculation right, because our system is incredibly complicated—about which, more in a moment. So, Making Tax Digital—fantastic. I will be an enthusiast for it on the basis that it is voluntary at the moment I am very pleased with the anti-avoidance measures in the Bill. Anti-avoidance is not just good for the Exchequer; it is good for all the other taxpayers. Recovering more tax from those who avoid and evade it means that the taxes for those who pay their tax on time and to regulation do not have to rise quite as high as they otherwise would—indeed, they could be cut. We ought to bear in mind the Government’s proud record of recovering, I think, £140 billion under anti-avoidance and anti-evasion measures. That says something about how the tax system was run before they came into office. That this amount of excess was squeezed out of the lemon says something about the way previous Chancellors ran the system, and perhaps about how they would in the future I join my hon. Friend the Member for Berwickshire, Roxburgh and Selkirk (John Lamont) in welcoming the end of the permanent non-dom status. It seems insane to me that people who have lived in this country for decades could have a more beneficial tax arrangement than those who were born here and have lived here for exactly the same amount of time. The Government are doing the right thing in plucking the goose of non-doms enough to recover the money that they should be paying, but not so much that they migrate elsewhere I want to raise with the Government two areas on which I recognise that something needs to be done, but where there are wider implications for the economy. The first is the change to the nil rate band for dividend taxation. I declare an interest as a business owner who is, from time to time, in receipt of dividends. Like many small business owner-managers, I will be affected by the change. I recognise that I have to shoulder my share of the burden of dealing with our national finances. We are still running a deficit. We have massive and increasing national debts that need to be addressed at some stage and it falls to my generation of business people to help to do that. However, we have to take care in this party about what signals our taxation policy sends to people about how they should behave, what we value in society and the nature of capital We are incredibly good in this country at inventing things. We have the largest agglomeration of scientific research on the planet and more Nobel prizes in one Cambridge college than in Germany and France combined. In fact, Trinity College, Cambridge has more Nobel prizes than Japan, the third-biggest economy in the world. We are incredibly inventive but not very good at turning those inventions into companies. We used to put capital and idea together, under the great Queen Victoria, when we built our wealth on ingenuity and buccaneering capital, but since then we have not done it quite so well or with such frequency Of the top 500 companies in the world, only two were created in Europe in the last 40 years, while dozens have been created in other parts of the world in that time. Those two are both British—Vodafone and Virgin—but there should be a lot more. There are lots of 18th, 19th and early 20th-century companies in the top 500 from this part of the world but no recent ones, and that says something about the dynamism of capital in this country As we look towards the future economy, we know that our success is not guaranteed. It is likely that we could be squeezed between the United States, with its incredible appetite for ideas and its romping capital constantly looking to invest in those ideas, and China, with its incredible ability to spend enormous amounts of public money and its disrespect for intellectual property derived elsewhere in the world. If we cannot close this gap between idea and capital, we could find ourselves squeezed.