Tax: Avoidance and Evasion

Debate between Baroness Kramer and Lord Tugendhat

Tuesday 13th September 2016 Lords Chamber

[Lord Tugendhat (Con)]

My Lords, I begin by congratulating my noble friend on his constructive and imaginative suggestions. One great virtue of the House of Lords is that it brings to bear expert opinion on a variety of complex subjects. The speech that we have just heard by my noble friend is a very good example of what somebody who has spent a lifetime in a particular field can bring to the legislative process. I look forward to hearing what my noble friend the Minister has to say in response.

I cannot resist pointing out that in this discussion about what steps the Government are taking to mitigate tax avoidance and eliminate tax evasion in the United Kingdom, not a single Back-Bencher in the Labour Party or the Liberal Democrats has chosen to contribute. It is only Conservative speakers—apart from the Front-Benchers, of course—who have anything to say on that subject. That is something worthy of note.

[Baroness Kramer (LD)]

I point out to the noble Lord that we have just had a debate on the Finance Bill in which not a single Conservative Back-Bencher spoke. I suggest that he is a little more careful when he decides that finger-pointing is appropriate.

[Lord Tugendhat]

That is a very good riposte, on which I congratulate the noble Baroness, but the two subjects are quite different. My point simply is that we have this very interesting subject for debate, and her colleagues—and she has a great many of them; the Liberal Democrat Party is absurdly overrepresented—do not seem to find it of particular interest. That was my only point, but I accept her earlier criticism.

From a Conservative point of view, we feel that if the Prime Minister’s comments and undertakings about creating a society fairer for all are to carry conviction, it is very important that the issue of tax evasion and tax avoidance should receive a very high priority. It is something on which the last Prime Minister and the previous Chancellor of the Exchequer had strong words to say, but not enough action was taken—and I hope very much that in the May Government we will see more action more quickly on this front.

The introduction of a criminal offence for firms which do not stop staff facilitating tax evasion will certainly be a good place to start. Evasion can arise not just because a company wishes to evade tax but also because executives want to earn bonuses. Their bosses see the beneficial result of their imaginative actions and do not look too closely at what is happening, with the result that the company’s tax burden is reduced without anybody having taken responsibility at the highest level. The aim must be to deter not just companies but also individual executives from seeking to evade tax or avoid it beyond a reasonable level, as my noble friend was discussing.

The House will be aware of the charges currently being brought against former senior Tesco executives for fraud by abuse of position and false accounting. It is very hard for the authorities to go for Tesco itself unless the former CEO himself is charged. Will the Minister say what the position would be in an analogous case involving tax evasion, so far as the Government’s plans are concerned? Once those plans have been published, would individual executives find themselves at risk, as well as a company?

I have another question for the Minister. Will he give us an indication of the Government’s view of the European Commission’s demand that Apple should repay the Irish Government some €13 billion in uncollected taxes? I know that the Commission’s action raises many delicate issues of international law and state aid, as well as tax. I am also aware that the Government may well be reluctant to take up a position or intervene in an issue that involves the European Commission on the one hand and the Irish Government on the other. However, whatever else the Commission’s action does, it shows how a large multinational corporation can set up arrangements that enable it to avoid paying vast sums of tax. I say, “avoid”, because there was nothing illegal in Ireland about what Apple was doing. It is the Commission which is challenging it on the grounds of state aid, rather than tax.

Apple is, of course, only one of a great many companies that have shown similar imagination, not just in Ireland but elsewhere. The Commission’s move may or may not be the best way of tackling this problem; I am not an expert and I have no idea whether it is or not. However, I applaud the Commission because, whether or not it is the best way, it does actually seek to tackle a long-standing scandal that Governments, including our own, have so far evaded. The Commission has, as it were, thrown the ball into the line-out and it is now for Governments to determine how best to handle it. It is very important that we get an idea of what the British Government’s view on this matter is. The Commission has also demonstrated that there comes a point at which evasion and avoidance become virtually indistinguishable. The line between them has become so blurred because there does not seem to be any liability on the part of Apple to pay tax anywhere at all.

Finally, I point out that, whether or not we are in the European Union, this is a problem that can only be tackled by Governments on a co-ordinated basis. The United States is not going to lead on this issue because its own multinational companies can bring pressure to bear in Washington, as Apple has very effectively demonstrated and as the American Government’s response to the Commission’s actions shows. Therefore, in the countries where multinational companies operate, only the EU can effectively challenge these companies. The individual member states—or individual states, as we will not be a member for much longer—do not have the clout to do so. I hope the Minister can assure the House that, as we negotiate our way out of the European Union, this is an issue on which we will work as closely as possible with the EU institutions and other member states. It is in our national interest to do so and it will be a test of whether we put our national interest or dogma first.