Finance (No. 2) Bill — House of Commons, 2016-04-11
Topic: Macroeconomics
Caroline Louise Flint (Labour, Centre-left): I have no doubt that the support of the hon. Member for Macclesfield (David Rutley) for greater productivity and skills is heartfelt, but sadly, as my hon. Friend the Member for Feltham and Heston (Seema Malhotra) has outlined, this Finance Bill falls far short of meeting the needs of people on low or even average incomes in this country and helping them to do better for themselves and their families It is interesting that the Second Reading of the Finance Bill, which should be the centrepiece of today’s discussions, has been knocked off track somewhat by the disclosures in the Panama papers. Given that we have a major Finance Bill before the House, it is absolutely right that we consider whether it really addresses the central issue of fair taxation and how it can clamp down on tax avoidance and evasion Recent events have exposed parallel worlds. In the world of most of Britain’s 29.7 million taxpayers, taxes are deducted automatically. January was the month when 10 million everyday citizens submitted their tax returns. The first week of April is when most of the 22.7 million people who save in an ISA were looking at how they could top it up. That is the world of most of our citizens, the people who work, pay their taxes and follow the rules. They meet the deadlines. They are the people who put into the system and occasionally need to take out of it However, there is another world, a shadow world occupied by a group of people, small in number but big in influence, who share another set of characteristics. These are the people who play by a different set of rules. They are wealthy but, not satisfied with just being wealthy, they also want to be tax-free. Being rich is not rich enough. They live across borders, have homes in several countries and bank accounts in others, with businesses nominally located in low or no-tax regimes. That is not because they are busy or simply because they are successful. There is one overriding purpose: to maximise the income sheltered and obscured from tax authorities Tax avoidance is not illegal, but the Prime Minister himself has criticised aggressive tax avoidance schemes that subvert the intention of domestic tax laws. To muddy the waters over the past few days, some have suggested that ISAs and helping one’s children are forms of tax avoidance. They are not. To my mind, avoidance is when someone deliberately does something that Parliament never intended. Governments have legislated against particular means of avoidance, attempting to close a specific loophole each time. That kind of patchwork policy making has been described as like plugging holes in a colander, or playing whack-a-mole. The point is that, given the complexity of our tax system, tackling tax avoidance measure by measure is very hard to get right The disclosure of tax avoidance schemes regulations introduced by the previous Labour Government in 2004 were key to helping HMRC uncover new information about tax avoidance practices and getting hold of that information earlier. As a result, HMRC learned about schemes that it had never heard of, or ever imagined, and then it could act quickly to shut them down. Those were the first steps in a campaign for transparency. The coalition Government’s co-operation with the OECD’s base erosion and profit shifting measures was to be welcomed, as was their introduction of accelerated payment notices, which I believe have successfully recovered more than £2 billion in unpaid taxes This Bill includes a range of measures, including an updated general anti-avoidance rule, the publication of statements of tax strategy and tax planning, and a new asset-based penalty system for large-scale tax evasion, but it is as yet unclear what effect, if any, each measure will have. Even the most intense challenge to tax avoidance by the Government must compete with the ingenuity of legal and accounting experts that the very wealthy and the corporate giants have access to, and the global nature of their enterprises. That is why I want Parliament to tackle one of the strongest weapons in the tax avoider’s armoury: secrecy. If there is one thing that the Panama papers have shown us, it is the urgent need for more transparency It is tempting to focus on MPs’ tax returns this week—for the record, my taxable income for 2014-15 was £58,724, on which I paid £12,965.80 in tax—but the income of the largest multinational in one week is more than the combined annual incomes of every Member of Parliament. That is not surprising, and some may say thank goodness, but I want to make sure that, in the midst of all the comments about tax, we do not let multinational companies off the hook. When Google agreed to pay HMRC £130 million in back taxes, the Chancellor claimed victory. My cross-party colleagues on the Public Accounts Committee and I questioned Google and HMRC. Yet even after a long session, not only was Google’s Europe, middle east and Africa president, Matt Brittin, unclear about his salary, but we remained unclear whether the £130 million represented a good deal. On top of that, I discovered that the Government’s diverted profits tax—the so-called Google tax—does not in fact apply to Google. It is still not certain what revenue the Government hope to gain from this measure. Even if Government estimates of £360 million a year are forthcoming, that is but a drop in the ocean when one begins to look at the operation of these enterprises I therefore decided to introduce a ten-minute rule Bill —the Multinational Enterprises (Financial Transparency) Bill. Its purpose is to require large multinational enterprises, which, as of January this year, must provide HMRC with their country-by-country reporting information, to include the same information in their annual returns to Companies House.