Taxation: Avoidance

Lord Dykes Excerpts

Thursday 28th June 2012 Lords Chamber

[Lord Sassoon]

My Lords, I am always prepared to consider every suggestion that comes up in your Lordships’ House. However, I think that one is getting a little radical and I cannot promise him much early progress on it.

[Lord Dykes]

Will my noble friend bear in mind that, as tax avoidance and evasion from the UK is at least 15 times greater than social security abuse and fraud, that the Government should therefore be 15 times more energetic in dealing with tax avoidance and evasion than they are with social security?

[Lord Sassoon]

My Lords, I do think that we are comparing apples and pears. We will be vigorous on both fronts. In relation to tax avoidance, HMRC has reassigned some £900 million of its expenditure within the spending round to tackle this issue. We should also remember that while the tax gap in the UK is £35 billion—about 8% of liabilities—it compares well on an international comparison. For example, the equivalent in the US is 14% and in Sweden 10%. So, yes, there are big numbers to be played for, but good progress is being made.

European Union Committee: Multiannual Financial Framework

Lord Dykes Excerpts

Tuesday 19th June 2012 Grand Committee

[Lord Dykes]

My Lords, my response to the melodious and Parnassian beauty of the descriptions of the noble Lord, Lord Harrison, today is to express admiration for his work in the sub-committee, particularly in the area that he was talking about, and to thank him very much. It removes from me the need to go into some of those areas myself, which I shall observe with some enthusiasm and try to be brief. Indeed, unlike previous speakers, I do not have a written text today. If anybody has heard this terrible story before, I apologise in advance. There was a Yorkshire vicar in the pulpit on a Sunday—I will try the accent, but do not laugh—who said, “I am afraid I do not have my usual written sermon today, because I have been so busy during the week. There were two scout camps and the guides were going away as well. I had three funerals to do and four weddings to prepare, so I don’t have one of my usual written sermons that you enjoy so much. I am relying exclusively on divine inspiration this evening, but next week you will get a proper sermon again”.

In that spirit, I will focus on only one or two things. First, I thank the noble Lord, Lord Boswell, for his report as the new chairman and wish him well for the future. This is an important exercise. One can say without complacency that the Commission’s long-term planning for these budgetary constructions worked pretty well in the previous period as well, with some ragged bits and pieces and the continuing British anxiety about the rebate. Whether the rebate was originally intended to last for ever I am not sure. I do not think that that was the case. It is interesting to reflect that, if it now involves everybody in a general recasting of the GNI component of the structures, that may be a totally different thing that the Commission can propose. I hope that it would be accepted.

There is a very small amount of money in this European Union budget, despite the recent years’ growth, with €150 billion as the first figure for the new period and €140 billion at the moment, or thereabouts. The actual expenditure is always less than the amounts allocated, year in, year out. So it is quite a virtuous budget with no debts and no borrowings; the receipts have to equal the payments, by law, and there is no exception to that. It is a very good example which certain states in the United States should look at closely. However, it belongs to the whole Union and is a very tiny mechanism in comparison with what the national member Governments do, and we have to be realistic about that. The timing now could mean that the considerations of long-term planning for a five or seven-year period in future can be irrelevant to the immediate crisis in the eurozone and the fact that there is a developing deflation—some would say a quasi-slump—in a good number of the member states, including the ominous signs in Britain after our recent double-dip recession. No one knows exactly—predictions are always difficult, particularly when they concern the future, as one sage observed—how this will pan out.

In the mean time, the budget has been improved in recent years, and that will be built on in future. I believe that about 80% of the outlays are shared with the administration of the member states, so there is a low level of mistakes, according to the Court of Auditors, in comparison with the millions of transactions every week, month and day. The amount of fraud is minuscule, as we know. So the general support for the budget, philosophically and in this Committee’s discussion, is reflected by the speakers, who feel that it is a good rather than a bad thing to have, although it is very small indeed. Now it has a greater orientation towards long-term investment and cohesion, perhaps bringing the EIB not into the budget itself but into some of the long-term outlays that will be needed for infrastructure spending and improvement. Then the trans-European networks are developing, along with other aspects of transport policy, which allows us to have a much better future. I hope that it will be successfully negotiated by the member states and the Commission.

I wish to comment briefly on what was enunciated by the section in the original report up to 2014 on page 23, from paragraph 57 onwards. For example, paragraph 58 says:

“Greater use of EIB financing and higher contributions from the private sector are desirable”,

because the Commission, with the public money available to it from the member states and its own resources, cannot do much more in comparison with what national Governments will do in future to deal with their own economic crises. The particular national economic crises in the member states will probably not spare many, although Austria and Sweden may be examples. Many member states will be confronted by these problems, so we must take great care in future to make sure that we succeed in avoiding the slump over the whole European Union that is threatening to develop.

It is interesting to see, at the beginning of the summary of the second report, at the end of the second paragraph, the admonition that,

“withdrawing funds from an ailing economy only risks making matters worse”.

That is the general proposition that may apply to more than just one or two member states.

If the Government can in future—and I wish the Minister well with these complicated negotiations—link the construction of this new period for the MFF to the immediate medium-term problems facing member states, that would be good indeed. In a phantasmagorical moment, one could imagine that if the slump was allowed to develop and continue because austerity programmes were not relaxed at all, as Governments endlessly waited for demand somehow to pick up automatically of its own accord without the necessary injections of new long-term capital, the EU budget might look like the combination of a kind of Tennessee Valley Authority and one or two other of those special measures that Roosevelt brought in to deal with the terrible recession and slump in the United States. It is in that spirit that I hope that this exercise is successful when negotiations are concluded, and I hope that the Minister will reassure us that national Governments are alert to and aware of the dangers that we all face.

EU: Euro Area Crisis

Lord Dykes Excerpts

Thursday 24th May 2012 Lords Chamber

[Lord Sassoon]

Again, my Lords, I will not speculate on the range of scenarios. Plenty of advice has been given to the UK Government, to each of the individual Governments in the eurozone and to the eurozone collectively. The important thing is to get on with it. The next major milestone will be what the Greek people decide at their forthcoming election.

[Lord Dykes]

My Lords, does my noble friend agree that the British Government played a very constructive role in last night’s summit meeting? Will they use their voice to persuade Germany to think again about the business of collective Eurobonds, and enlarging the firewall to make it realistic? That would be an excellent and effective way, without causing inflation, of having a lower yield overall, which would get over the nonsense that eurozone market ratings at the moment are generally lower than those of the much more heavily indebted United States of America and Japan.

[Lord Sassoon]

I certainly agree with my noble friend that my right honourable friend the Prime Minister played a very constructive role in the discussions last night and is clearly open to a range of ideas.

EU: Economic and Financial Issues

Lord Dykes Excerpts

Monday 12th March 2012 Lords Chamber

Asked by

[Lord Dykes]

To ask Her Majesty’s Government when they will next hold high-level talks with their European Union partners on economic and financial issues.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, the Government hold high-level talks with all our European Union partners on economic and financial issues at the regular European Union Economic and Financial Affairs Councils. The next Economic and Financial Affairs Council—ECOFIN—is taking place tomorrow, Tuesday 13 March.

[Lord Dykes]

I thank my noble friend for that Answer and wish him well for that meeting. Can he explain carefully to the House why, since we had achieved—with some skill—all our objectives on the innovation, investment and growth programme of the EU at the recent meeting of all the member states, we did not therefore show solidarity by signing the fiscal compact treaty as well, alongside every other member apart from the Czech Republic?

[Lord Sassoon]

My Lords, the fiscal compact intergovernmental treaty was discussed at the European Council on 8 and 9 December. As has been discussed on a significant number of occasions, the UK did not get the safeguards it was looking for and is not a party to that treaty, which is why we did not sign it in the fringes of the European Council on 1 and 2 March.

EU: Fiscal Compact Treaty

Lord Dykes Excerpts

Tuesday 7th February 2012 Lords Chamber

Asked by

[Lord Dykes]

To ask Her Majesty’s Government what progress they are making on discussions with European member states on the future legal basis for the European fiscal compact treaty.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, although the United Kingdom will not become a party to it, we have participated fully in discussions on the intergovernmental treaty on stability, co-ordination and governance in the economic and monetary union. The parties have set out their desire that its substance will be added to the EU treaties in the future. Any such addition to the EU treaties would need to have the agreement of all 27 members.

--- Later in debate ---

[Lord Dykes]

I thank my noble friend the Minister for the very substantial and indeed creative fence-mending by Her Majesty’s Government that has taken place since 9 December. Does he agree that although we are not yet members of the fiscal compact treaty, now that that has been successfully signed by all but two, it is our duty, as we stated before Christmas, to make sure that we help the eurozone authorities and the national leaders return the eurozone to its strength as a traditional international currency?

[Lord Sassoon]

My Lords, I am happy to confirm to my noble friend that of course this intergovernmental agreement, which goes to the heart of strengthening the fiscal arrangements within the eurozone, is a necessary but not sufficient part of what we hope to see with the eurozone returned to health. There are a number of other critical elements, including sorting out the immediate situation in Greece, getting the European banks’ capital positions where they need to be, and so on.

Taxation: Avoidance

Lord Dykes Excerpts

Thursday 26th January 2012 Lords Chamber

Tabled By

[Lord Dykes]

To ask Her Majesty’s Government what action they are taking regarding tax avoidance by business figures in the United Kingdom.

[Lord Dykes]

My Lords, I am grateful to the usual channels for providing time for this debate and to the Treasury Minister for coming to the Front Bench at this time. I apologise to him that it is lunchtime—although a slightly late lunchtime because of the previous debate—and I welcome his visit to deal with this important and thorny matter. He is a very busy Treasury Minister and I wish that I could have saved him having to do without lunch on this occasion. I hope he can catch up with that later.

I declare an historic interest as a former member of the London Stock Exchange for many years and as a partner in a leading institutional stock broking firm, as well as a shareholder in other former City interests.

The title of the debate deliberately uses the word “avoidance” because of the grey area of avoidance leading into illegal evasion as well. The title focuses deliberately on the behaviour of business representatives and groups because that really covers almost the whole field. Most wealthy individuals, as well as companies, who seek to lower their tax liabilities tend to arrange schemes through accountants and other professional advisers. Equally, however, it would be reprehensible if non-business sector individuals were either avoiding tax unfairly or evading tax illegally through their own decisions without advisers. I have sought to raise this issue for some time because of the widespread public concern that one hears here, there and everywhere that improper tax avoidance is widespread in the UK. These matters are very sensitive right now because of the bank bonus season as well—we of course assume that our senior bank director colleagues declare and pay tax properly. Bank bonuses and whether they are justified are not within this subject. It is because rumours are so often an inadequate substitute for facts that HMG need to answer questions from Members of Parliament to allay concerns.

Of course, the concept of unfairness in the tax system is hard to grasp. The public as a whole has a strong and maybe unfair impression that ordinary taxpayers, mostly but not all subject to the deduction at source system, do not have the sophisticated advantages of professional and corporate taxpayers to soften what some people regard as the hammer blows of brutal tax demands. Add to this the widespread feeling that, unfortunately, our colleagues in the main part of the coalition seem psychologically far more interested in giving lower-income individuals rather a rough time by cutting into their social benefit payments than pursuing their—dare I say?—friends in the world of business over tax dodging, then we have an explosive political cocktail about the relentless growth of the unequal society. That is mercifully nowhere near the lamentable position in the USA, with its by-now medieval inequalities, obliging even Warren Buffett to complain yet again recently. Personally, I have a cousin in California who is a member of the Libertarian Party that regards any tax apart from defence spending and foreign affairs as positively poisonous and communistic.

In the excellent debate on financial crime legislation launched by my noble friend Lady Williams on 17 March last year, I raised what I called the “sad” case of Sir Philip Green—that is at col. 385 of Hansard—who was able to channel his £1 billion-plus dividend from his brilliant and skilful reorganisation of BHS through his wife as a resident of that little territory, Monaco, and thereby avoided paying, I think, £200 million or more in income tax on the dividend. Far from condemning outright this pathetic example of sheer greed, the new coalition Government later hired him as a totally ineffective adviser on efficiency in government. We do not find it hard to imagine how ordinary struggling families feel when they see such goings on in Britain. Could HMG ask HMRC to contact Sir Philip to see whether he could persuade his wife to reconsider and possibly make a voluntary donation to the Revenue as a gesture of social solidarity in these tough times, especially since apparently several hundred Topshop stores are now to close because of the fierce recession? No wonder this sad little saga spawned the UK Uncut movement.

I intend to stay within the time limit of my speech but unfortunately the monitor Clock is incorrect and I do not know when I started. I hope it will be adjusted as quickly as possible.

Of course, I expect the Minister to say on these matters, as ever, “We do not comment on individual cases”. I understand that, but the lack of accountability then speaks volumes and the public can draw their own conclusions. At least he might today try to reassure us that the colossal tax dodging that apparently occurs routinely in Britain nowadays is being dealt with. Despite some enlargement of the personnel at HMRC in recent times, it is by all accounts still struggling manfully—and womanfully, I assume—to cope with the huge backlog of dodgy schemes.

Why is it, as I hinted in that same debate in March last year, that if, for instance, you go to dinner parties in large houses in Wiltshire or Oxfordshire—I do not know about Chadlington but maybe elsewhere, too—around the table are people who appear to be in the UK a great deal but who scoff when someone says, “I pay full taxes”? Perhaps they are just boasting and making it up, but all sorts of rumours swirl around.

The absence of definitional precision helps that process of confusion and the shrugging of shoulders. Hence statistics on tax avoidance are fiercely contested and the interpretative basis is elusive. In a court of law for example, the judges presumably base their findings on what Parliament intended in any laws and regulations. That examination alone can spawn huge fees for yet more lawyers and accountants. For instance, I am assured by friends in so-called professional circles that a large number of senior broadcasters in both the public sector—that is, the BBC—and private TV and radio services routinely have corporate plans of their own that offer much bigger offsets than personal taxpayers can claim paying tax as individuals, even though these broadcasters are of course individuals. Can the Minister help here and give us any information that the Government might have to hand?

HMG have regularly referred to what they consider to be more than a £40 billion tax gap—“gap” is the word I use here. On the assumption that it would be somewhat higher because HMRC struggles to cover all cases, if everyone who should pay paid up—like ordinary mortals—that would cover a good chunk of the deficit. However, we are struggling philosophically because HMG keep banging on about corporation tax being too high. Is a 50 per cent income tax rate so excessive when it starts at such a high level? We must be careful in this country to avoid the worst horrors of the Tea Party lunacy in America that progressive taxes are worse even than communism or a proper national health service.

What is the latest development on redress policies in the many other secretive tax havens dotted around the world, partly as a result of our historical British Empire? Are the UK and other authorities locally in those areas getting to grips with the most severe abuses—and abuses in general?

Our newspapers, reflecting the reality that most—with some honourable exceptions—are owned and run by non-UK taxpaying moguls who live all over the place but not the UK, probably do not want to run too many stories about UK tax dodgers. They prefer benefit fraud, as in the Daily Mail. That is a much more attractive story for them to run. Naturally, the practical difficulties for the authorities here in dealing with these problems are huge. I sympathise entirely and once again express appreciation for what the Minister and his colleagues have been trying to do in the Treasury.

We know all too well from the world financial crisis of 2007-08 that business anywhere is truly international, global and incredibly complicated. It is hard to keep up with the worldwide legions of tax advisers—often themselves multimillionaires as well. Look how enormous the biggest UK-origin accountancy firms—the famous names—have become as worldwide entities, usually in very large towers. I remember the furore last spring when it was discovered that the Treasury had missed out on some £17 billion of tax due from companies disappearing, along with their directors, or banks and other groups not paying their taxes properly. More than half a million companies were dissolved in 2009-10, with most removed from the official register because they did not even bother to file accounts. Indeed, the Oxford University Centre for Business Taxation estimated last year that nearly a million companies failed to pay tax at all, even though presumably only a small proportion of those were not trading. Richard Murphy, a well-known director of the consultants Tax Research LLP, calculated that the total tax gap in Britain two years ago was over £120 billion. No one knows whether that is correct, but it is obviously likely to be significantly higher than the £40 billion mentioned by the Government on several occasions recently.

I hope that the Minister can reassure the House today that these estimates are ahead of the true figures. My anxiety is that, in reality, not even the Treasury, hardly known for its huge competence in guiding the ever-faltering British economy in recent decades, actually knows the truth. In replying to the debate, I hope that the Minister will also refer to the tax treatment of the overseas subsidiaries profits in UK-registered corporations which seem to be of special artificial help to the banks in recent times.

Finally, he may generously wish to guide us with his analysis of the cash-only economy—the black economy—which obviously deprives the Inland Revenue part of HMRC of yet more tax revenues, and how the authorities have managed to deal with VAT fraud and evasion. I am sure that the Government do not wish to give the impression that they are much keener on cuts in services than getting in more tax from what is apparently regarded in the City—some people repeat this again and again—as an army of tax dodgers in Britain.

[Baroness Stowell of Beeston]

I am sorry to interrupt my noble friend and that the Clock was not working properly. I thought he would find it helpful to know that he has exceeded his 10 minutes.

[Lord Dykes]

Because of the Clock, I conclude by referring to Danny Alexander, Chief Secretary to the Treasury, who said on Tuesday that tax dodgers have nowhere to hide and that we will get them. I would be grateful if the Minister commented on that comment from the other place.

Economy: Deficit Reduction

Lord Dykes Excerpts

Thursday 15th December 2011 Lords Chamber

[Lord Sassoon]

My Lords, first, the deficit reduction strategy, as the OBR confirms, is absolutely on track. If the noble Lord is suggesting that we should cut expenditure and raise taxes, is that the policy of his party?

[Lord Dykes]

My Lords, did the Minister notice that the credit rating agencies and the American-dominated $16 trillion debt system gave AAA ratings to all the hedge funds and banks that collapsed in the United States and elsewhere in the world just about a week or a few days before they actually did collapse. Are they really so reliable?

[Lord Sassoon]

My Lords, the track record of the credit rating agencies as far as sovereign debt is concerned speaks for itself. It is quite different to the mistakes that they have made in other sectors.

International Monetary Fund

Lord Dykes Excerpts

Thursday 24th November 2011 Lords Chamber

[Lord Sassoon]

It would be unproductive to be drawn into the history of the arrangements that the previous Government committed this country to, but we could go into that if noble Lords want to. This Government are completely clear: we will support the IMF on a bipartisan and all-party basis, as we have always done since its inception. It must be for the eurozone countries to put in place their mechanisms for future support.

[Lord Dykes]

My Lords, does the Minister not agree that in view of the deep urgency of this crisis, which the noble Lord, Lord Barnett, referred to—indeed, the United States is the most irresponsibly indebted country of all in the whole IMF system—there is a growing case for a significant increase in these facilities and for working with the eurozone for the good of the whole world? Otherwise this problem is going to grow and grow, including in non-euro countries.

[Lord Sassoon]

My Lords, I would just reinforce to my noble friend that at the G20 Britain and all the other countries agreed to ensure that the IMF continues to have all the resources that it needs. There is no lack of commitment to the IMF having those resources. We now need to see what proposals develop. I agree that the situation cannot drag on for ever.

Euro

Lord Dykes Excerpts

Thursday 27th October 2011 Lords Chamber

[Lord Pearson of Rannoch]

My Lords—

[Lord Dykes]

My Lords—

[Lord Strathclyde]

My Lords, let us have the noble Lord, Lord Pearson, and then, if there is time, the noble Lord, Lord Hannay.

EU: Financial and Monetary Co-ordination

Lord Dykes Excerpts

Monday 6th June 2011 Lords Chamber

Asked By

[Lord Dykes]

To ask Her Majesty’s Government whether they will consider making proposals to their European Union partners to strengthen economic, financial and monetary co-ordination within the Union.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, six legislative proposals aimed at strengthening co-ordination on financial and economic matters across the EU have already been agreed by the ECOFIN Council. These are currently the subject of discussion and negotiation with the European Parliament. The measures would strengthen the stability and growth pact and formalise the monitoring of economic imbalances. The Government recognise the importance of strengthening co-operation and co-ordination, and fully support the package agreed by ECOFIN.

[Lord Dykes]

My Lords, I thank the Minister for the way in which the British Government have strongly supported in ECOFIN the various measures that are being taken by both the ECB and the member Governments. Does he agree that advanced countries like the United States and other leading countries like Britain were already heavily indebted before the financial crisis and are even more so now, and that it is important for this country to stand in support of the eurozone countries and the ECB to defeat the ruthless international speculators wherever they may be, especially as—you never know—we might need their help in the future?

[Lord Sassoon]

My Lords, I am grateful to my noble friend for what he says about the Government’s approach to these matters. It is indeed in the country’s interest to ensure that the eurozone is strong—it is, after all, where more than 40 per cent of our exports go—and we will continue to work constructively on ideas to strengthen the framework. At the same time, we want to make absolutely sure that it is understood, as the Council has recognised, that the UK stands in a special relationship to the eurozone and that we will not have the fiscal sovereignty of Parliament in any way infringed on these matters.

I agree with my noble friend that fiscal discipline is key to ensuring that we do not get into problems like this again, whether within the eurozone or without it, which is why it is gratifying to see that the IMF, in its assessment today, has stressed this very point in relation to the UK’s deficit reduction programme.