Finance (No. 2) Bill — House of Commons, 2021-04-20
Topic: Mixed Topics
Margaret Eve Hodge (Labour, Centre-left): It is a pleasure to follow the right hon. Member for Sutton Coldfield (Mr Mitchell), with whom I work very closely on this issue; it demonstrates the best of Parliament that we are able to do so across the House I rise to speak in support of amendment 77, which stands in my name and that of members of the all-party group on anti-corruption and responsible tax. Our proposals command support across the House, and I know the Minister will therefore address this issue thoroughly and seriously, not just in his response today but in the work that I know he is doing to bear down on those who enable and support tax avoidance and financial crime. I simply say this to the Minister: he may have reservations about the technicalities of our proposals, but he should at the very least accept the principle that underpins them and say so today Big corporations and high net-worth individuals who engage in tax avoidance schemes and financial crime do not dream up these schemes on their own; they are invented and developed by the huge army of tax professionals—accountants, lawyers, banks and advisers—who spend their working life trying to identify loopholes and wheezes. The schemes they devise do not just help but actively encourage people not to pay their rightful contribution through tax to the common purse for the common good. At present, HMRC may slowly and belatedly catch up, and may deem such schemes unlawful. If it does so, the individuals have to pay up and sometimes face enormous tax demands, but the enablers of tax avoidance mostly get away scot-free; at worst they may lose the fees they earned from setting up the scheme for their clients. Our amendment would hold these enablers to proper account. If advisers and promoters involved in a scheme know that the scheme does not work, they are committing the criminal offence—mentioned by the Minister—of cheating the public revenue. They are breaking the law, so they should be pursued, charged and convicted with a criminal charge That does not happen now, and our amendment seeks to make it easier for the enforcement agencies to pursue criminal prosecutions. Not only would they hold the advisers to account, but I am completely convinced that the threat of a criminal prosecution would act as the most effective deterrent and bring to a halt many of the activities of these rogue advisers. It would be the most efficient way of tackling tax avoidance at source. It is a common-sense approach to the problem, and it would be welcomed by all taxpayers, who are so frustrated by paying their tax unquestioningly while seeing others avoid tax or break the law. It would restore confidence in the tax system. It is a good idea, and I hope that when the Minister responds he will say that he shares our view that we need to amend our legislation to make it easier to pursue and prosecute advisers who deliberately promote egregious schemes that are unlawful I know from my time chairing the Public Accounts Committee how embedded the culture of avoidance, evasion and financial crime has become in our financial services sector. We saw it plainly with the revelations from HSBC, with the Falciani leaks from its Swiss branch. It was there in the PricewaterhouseCoopers leaks keenly exposing that firm’s activities in Luxembourg. The Panama papers uncovered the shenanigans involving the law firm Mossack Fonseca, while the Paradise papers disclosed the nefarious activities of another law firm, Appleby. While it may no longer be seen as cool to be involved in tax avoidance, the latest leak of documents contained in the FinCEN papers spells out the complicity of major global banks in facilitating and enabling financial crime, from tax avoidance through to fraud and money laundering Normal working people, however, often suffer the most. The film tax relief that was exploited ruthlessly by the company Ingenious Media left many facing huge tax demands, though the chief executive, Patrick McKenna, is still lauded through public appointments in the creative sector. The loan charge scheme was promoted vigorously by enablers. They walked away scot-free, but left devastation in their wake. I understand from the all-party parliamentary loan charge group that seven suicides have been reported to the group—people driven to suicide because they were conned by enablers into participating in a scheme that later unravelled. That is truly shocking I welcome the consultation that the Government have launched on tackling the promoters of tax avoidance. The all-party parliamentary group will be preparing a response to that consultation. Most advisers, of course, work in an honest and straightforward way, and we do not want to pursue with criminal charges those who make an honest mistake, but there are still individuals, companies and organisations who deliberately and wilfully promote egregious schemes that they know do not work. Such enablers move quickly, they are well resourced and they are well capable of outmanoeuvring HMRC. As soon as one wheeze is uncovered, they move on to the next. Worst of all, they act with impunity, safe in the knowledge that they will escape any real punishment if they are ever caught Why do these rogue advisers not get prosecuted? The answer lies in what the Minister said: HMRC has to demonstrate dishonesty to proceed against them and it is virtually impossible to do so. The advisers can always claim that they honestly believed that the scheme would work. We therefore want a new test, which makes criminal prosecutions feasible and practical We suggest adopting the test that is in place for the work of the GAAR—the bar for prosecution for those ne’er-do-wells should be just as stringent. It would simply make it possible and practical to take action. HMRC would have to demonstrate not simply that the avoidance scheme was not reasonable; it would have to demonstrate that it was not reasonable for anybody to think that the avoidance was reasonable. Sorry for the complication, but that is a double reasonableness threshold. I assure the Minister that that double reasonableness test is in effect the same as the "beyond reasonable doubt" test that he mentioned in his opening remarks. Of course, it would be easy for enablers to avoid prosecution —they just need to stop promoting or recommending tax avoidance that is so aggressive that they know it will fail Our amendment tackles a gross injustice in the system. People are completely fed up with reading endless stories about scurrilous tax avoidance schemes promoted by those working in the financial services sector. The perceived difference in the way that hard-working taxpayers and rich individuals are treated breeds mistrust. We suggest a practical change in the law that would make it possible to pursue the enablers, not because we want to see the courts clogged up with prosecutions against bankers, accountants, lawyers and advisers, but because we think that that is the best way of making those advisers think twice before they promote unlawful schemes. It would deter most of them from trying to cheat the public revenue. I urge the Minister, please, to be bold on the issue, to state today that he will tighten up the law and to give us the assurance that, if he does not like our particular solution, he will come forward in a timely manner with his own proposal.