Tax Fairness
Charles Walker Excerpts(13 years, 1 month ago)
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Mark Reckless
I am grateful to my hon. Friend. He speaks about a person’s “principal residence”, so I assume that he would allow them to remain exempt from capital gains tax, notwithstanding the £2 million-plus property that they live in.
Mr Charles Walker (Broxbourne) (Con)
If it is somebody’s principal residence that will be taxed if it is worth more than £2 million, does my hon. Friend think that the threshold will be £4 million for husbands and wives who are living together in a home?
Mark Reckless
Who can tell with these things? My hon. Friend the Member for Bristol West (Stephen Williams) has given assurances, but the policy proposals that I cited have been submitted to the federal policy committee of his party. It is difficult as an outsider to judge how formal and important that is, but there are clearly Liberal Democrats who are talking about a broader tax on wealth and capital, including on jewellery. I think that would be a mistake.
It is unfortunate that the Opposition with this motion and our friends on the Liberal Democrat Benches have become so focused on the arbitrary sum of £2 million. The Government are doing very good things in raising tax from people who own high-value properties but have not been paying their fair share of tax. The Opposition and the Liberal Democrats seem to want to confine their efforts to rein in tax avoidance to those who own houses worth more than £2 million. I and my Conservative colleagues do not understand why we should be concerned about tax avoidance just when a person’s house is worth more than £2 million.
It is hugely welcome that the Government are bringing in the anti-avoidance measure of a 15% tax when homes that are worth more than £2 million are enveloped into a company, which is generally done for the purposes of tax avoidance. However, I am not entirely clear why we are doing that only for homes worth more than £2 million, except for the fact that that is the arbitrary number that has been chosen by the Liberal Democrats for such taxation. [Interruption.] The Opposition are calling out, but they did nothing about this matter for 13 years. It is a huge improvement that this Government are dealing with tax avoidance using properties worth more than £2 million.
Sheila Gilmore
The point I was going to make in relation to the matter that was, after all, raised in an intervention is that if everybody moved successfully and reshuffled, there would be no saving, and that is odd because a saving is wanted. It is in that context that people are saying, “What sort of fairness is it that imposes such a great burden of trying to effect economic recovery on those who are least well off? Could we look at other measures to show that we really are all in this together?” That is where the mansion tax comes in.
The mansion tax enables us, in part, to really feel—as a community and as a country—that people are bearing a fair share of the burden. We have heard a lot about tax avoidance and tax evasion. It worries me greatly that the justification given for removing the 50p rate of tax is that people are not paying it. Instead of looking at why people are not paying it, and whether anything could be done to ensure that it was paid, we again hear, “Actually, we’ll just take it away because they aren’t paying it.” That is not a good message to put out.
We have also had reference—in relation to the mansion tax, Mr Deputy Speaker—to not wanting to have such a competitive tax regime that we risk people fleeing our shores. Reference was made to the PricewaterhouseCoopers report about competitive tax rates. There is an interesting coda to that report from some of those who were surveyed. The question then becomes: will the increased competitiveness lead to increased investment in this country, because that is what is really important? Many of the tax people thought it was crucial to turn improved tax relief on capital expenditure into investment in this country, and that it should be the No. 1 priority for the UK. In 2010, the Chancellor abolished capital allowances for investment in his first year in office. Perhaps he would like to look at the whole report, and not just the parts that suit him.
An argument has been made—as it always is with regard to rates and council tax—about people who are asset-rich and income-poor. It is usually raised as a reason for not putting up council tax banding, for example. In the old days, it was used as a reason for not making changes to the rating system. Yes, we can all come up with examples of people who are in that position. Usually, the example is a widow who cannot afford to pay. However, we cannot design our entire system of taxation around that, and there are ways it can be mitigated, as there are with council tax. If someone is genuinely as income poor as has been suggested, they would—at least until the Government decided to change the rules on council tax benefit—have been eligible for assistance with their council tax. There are always ways to help such people.
Earlier, I made what to some people might have seemed an unfair comparison. We were being asked to think about the widow who might struggle with a mansion tax. The 60-year-old widow I referred to is being asked to pay £13 per week out of an income of £71 a week, and the answer is that she should take in a lodger. If we want to be fair to both groups, we have to treat them with equal compassion.
Mr Charles Walker
As the hon. Lady will know, property values vary across the United Kingdom. A £2 million house in London may be the equivalent of a £500,000 or £750,000 house in Edinburgh. For the sake of fairness, does she think that there should be an additional tax on properties worth more than £750,000, so that people really do feel that we are all in it together and that this proposed tax will not just be borne by London and the south-east?
Sheila Gilmore
I am not convinced by that argument. If we were to enter into that, we would have do so in ways that I suspect the hon. Gentleman would not find particularly palatable.
There is nothing inherently wrong in levying a mansion tax. All the arguments made about the 50p tax do not apply to the same extent, because buildings do not disappear and cannot be shuffled around. It is a way of generating income and bringing in more tax revenue so that we can do all the things we want with public services, or, as we suggest, enable low-paid earners to have a 10p tax rate. Just because a mistake was made previously does not mean that we should not again consider a 10p tax.
Scotland Bill
Charles Walker Excerpts(15 years, 1 month ago)
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Ann McKechin
I beg to move amendment 68, page 18, line 11, after ‘may’, insert
‘after consultation with such persons as Scottish Ministers consider appropriate’.
The Temporary Chair (Mr Charles Walker)
With this it will be convenient to discuss the following:
Amendment 69, page 20, line 5, after ‘may’, insert
‘after consultation with (a) Scottish Ministers, (b) the Scottish Parliament and (c) such persons as it considers appropriate’.
Amendment 70, page 20, line 21, leave out subsection (4).
Government amendments 61 and 62
Amendment 43, page 20, line 35, after ‘Treasury’, insert
‘, with the consent of the Scottish Parliament,’.
Amendment 44, line 38, at end insert—
‘(6A) For the purposes of subsections (4) and (5)—
(a) reference to the consent of the Scottish Parliament means consent by resolution, and
(b) standing orders must provide that only a member of the Scottish Government may move a motion for such a resolution.’.
Government amendment 63
Amendment 47, clause 29, page 23, line 12, after ‘Treasury’, insert
‘, with the consent of the Scottish Parliament,’.
Amendment 48, line 28, at end add—
‘(7) For the purposes of subsection (4)—
(a) reference to the consent of the Scottish Parliament means consent by resolution, and
(b) standing orders must provide that only a member of the Scottish Government may move a motion for such a resolution.’.
Government amendment 64
Amendment 49, clause 31, page 24, line 8, after ‘Treasury’, insert
‘, with the consent of the Scottish Parliament,’.
Amendment 50, line 8, at end add—
‘(5) For the purposes of subsection (4)—
(a) reference to the consent of the Scottish Parliament means consent by resolution, and
(b) standing orders must provide that only a member of the Scottish Government may move a motion for such a resolution.’.
Government amendments 65 and 66
Government new clause 18—Orders
Ann McKechin
I am speaking to amendments 68, 69 and 70 and I wish to put it on record that the wording of those amendments was suggested by the Law Society of Scotland. I shall speak to the amendments first and then to the clause stand part—with your agreement, Mr Walker. I have a substantial number of questions to put to the Government about the implementation of this important clause.
On amendment 68, new section 80C empowers the Scottish Parliament to set by resolution the Scottish rate of income tax. This is an important power that is required to be exercised in accordance with the principles set out by the consultative steering group report published by the Scottish Office in 1999. These principles include accountability, openness and accessibility with a view to making possible “a participative approach” to “policy and legislation”. Accordingly, Scottish Ministers should, we believe, be required to consult those considered to be appropriate when proposing the resolution for the Scottish rate—much in line with existing practice of the Treasury here.
On amendment 69, new section 80G enables the Treasury to disapply or modify section 6 of the Income Tax Act 2007. This could involve issues such as gift aid relief or pensions relief. The order would be introduced in the UK Parliament and debated and passed or rejected in the UK Parliament. However, it could substantially affect the Scottish rate and Scottish taxpayers, as well as Scottish charities and pension funds, so we believe that Scottish Ministers and the Scottish Parliament should be specifically consulted prior to any amendment of these reliefs.
Finally, amendment 70 takes out subsection (4). We have concerns about the provision. Section 80G(4) provides that an order made under that section
“may, to the extent that HM Treasury consider it to be appropriate, take effect retrospectively”.
We believe that HM Treasury should, at a minimum, consult Scottish Ministers and the Scottish Parliament if retrospectivity is required. The Minister will not be surprised to hear me say that I think all Governments should avoid retrospective legislation whenever possible—unless there is a proven and specified need. We think that the case for retrospective application in this instance has not yet been made out.
The amendment is designed to probe this issue. The Scotland Office has indicated that the power would be used to make tax reliefs applicable retrospectively, but I suggest that this could be done either by regulation or statutory instrument. The clause enables a charging order to be made by the Treasury, which is a matter of concern to us. Any retrospective action by the Treasury could—I stress could—have a detrimental impact on individual taxpayers and on the Scottish parliamentary budget. I hope that when the Minister responds he will provide some assurance about the circumstances in which and when the Government intend to use this power. I hope he will confirm how limited the power will be when it comes to its practical exercise.
Paragraph 673 of the report by the Holyrood Committee asked a number of questions about residence. The question of residence is one about which most of the tax experts we consulted expressed some concern. I understand that there is no statutory definition of a UK resident taxpayer. This legislation, however, attempts to define by statute a Scottish resident taxpayer. Given that that is, in a purely technical sense, a subset of a UK resident taxpayer, I think the Minister would accept that it is unusual to have a fixed statutory definition within a floating definition. I would like to question him a bit further about how this will work in practice and what the levels of risk are in respect of the current application of the law.
Paragraph 673 of the Holyrood Committee report asks what “place of residence” means, as defined in clause 26, as it appears to be different from how residence is understood in other areas of tax law such as capital gains tax. Does place of residence imply ownership when juxtaposed against “main place of residence” in new section 80E(a), (b) and (c)? Place of residence and main place of residence are not defined in that new section, which I fear could present problems of interpretation. I would be grateful if the Minister clarified his understanding of the interpretation in this case.
How the tax is to be applied in practice is an important issue. The vast majority of Scottish taxpayers live the whole period of their lives in Scotland or live there for very substantial periods, and it is relatively easy to define who those people are. What about people working on board ships or on oil rigs, for example? What about members of our armed forces and what about those who are neither UK resident nor employed by non-UK employers? As I said, the Scottish taxpayer is defined by reference to an individual who is resident in the UK for income tax purposes. The current definition of UK residency lies in 86 pages of guidance that are the subject of frequent revision by HMRC. How, then, can the Government be confident that this definition is going to work? Do the Government agree with the Chartered Institute of Taxation that the introduction of a possible statutory residence test for the UK is now essential? Experts in, for instance, the Institute of Chartered Accountants of Scotland, the Chartered Institute of Taxation, the Federation of Small Businesses and CBI Scotland have expressed concern about the lack of a concrete definition. What are the Government doing to address those concerns expressed by professional experts? I understand that they are considering the issue. Will the Minister tell us whether they are likely to attempt to provide a better definition of a UK resident taxpayer in the Finance Bill that will follow next week’s Budget statement?
Autumn Forecast
Charles Walker Excerpts(15 years, 4 months ago)
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Mr Osborne
One of the primary tasks of the OBR is to assess whether we will hit the fiscal mandate. The very fact that the fiscal forecasts are not a matter of controversy in the House today shows what we have done to get the British public finances under control. The OBR assessed specifically the scenario that the hon. Gentleman volunteers and said that the fiscal mandate will be met under those conditions. In fact, rather perversely, that helps the fiscal forecasts because of the tax base being more focused towards consumption.
Mr Charles Walker (Broxbourne) (Con)
When the books are balanced, will the Chancellor seriously consider reducing the overall burden of taxation? Thanks to the efforts of the previous Government, it is far too high.
Mr Osborne
Of course, I am a believer in trying to reduce the tax burden and trying to reduce taxes. However, I have always believed that the best way to achieve that is from stable public finances, otherwise one cuts taxes one year and has to put them up the next. So I am a fiscal conservative with a small c as well as a tax-cutting Conservative with a big C.