Criminal Finances Bill

Debate between Lord Garnier and Diane Abbott

2nd reading: House of Commons & Money resolution: House of Commons & Programme motion: House of Commons
Tuesday 25th October 2016 Commons Chamber

[Ms Abbott]

My right hon. Friend is right. We need to look at the case of people who serve a prison term that may be relatively short, but are able, in effect, to flout the compensation order.

[Sir Edward Garnier (Harborough) (Con)]

I take the point that my neighbour, the right hon. Member for Leicester East (Keith Vaz), makes, but often when a criminal is sentenced, along with a compensation order or a proceeds of crime order, he is sentenced to an additional term of imprisonment in the event that he does not pay back the money. Sometimes those extended sentences can be very long—indeed, as long as or even longer than the original sentence.

[Ms Abbott]

Far be it from me to bandy words with the many lawyers in the Chamber. I repeat that as the Bill goes through Committee we will seek to examine the question of people flouting compensation orders. Overall, in relation to bearing down on money laundering, we welcome the relevant provisions, including the unexplained wealth orders, the reform to the suspicious activity reports regime, information sharing and the new disclosure orders.

The Bill also deals with tax evasion. In recent years there has been a great deal of public interest and a raft of Government measures on tax avoidance. Arguably, less attention has been paid to tax evasion. There is some blurring between the two terms, but broadly, tax evasion occurs when an individual or corporate entity acts in breach of the law, and tax avoidance occurs when an individual or corporate entity complies with the letter but not the spirit of the law. In recent years Her Majesty’s Revenue and Customs has produced estimates of the tax gap—that is, the difference between the tax that is collected and that which is theoretically due. Clearly, any such estimate must be speculative, but I draw the attention of the House to the fact that HMRC’s most recent estimate of the gap is £36 billion, which is the equivalent of 6.5% of total tax liabilities. Of that £36 billion that is lost, £5.2 billion is lost to evasion and only £2.2 billion is lost to avoidance.

We welcome the measures to bear down on tax evasion, and we welcome the provision that makes it a criminal offence for corporations to fail to stop their associated persons facilitating tax evasion. We particularly welcome the fact that this will have extra-territorial jurisdiction. However, we regret that in the tax evasion measures in part 3 there is no reference to the British overseas territories and Crown dependencies. That is a startling oversight. There are 14 British overseas territories. Just one of them, the British Virgin Islands, is mentioned no fewer than 113,000 times in the Panama papers. BVI, with a population of just 29,000—fewer than my own constituents in Hackney—is home to 452,000 international businesses. Maybe the 29,000 population is particularly skilled at accountancy and banking, but maybe some of those business entities are shells for tax evasion.

There are three Crown dependencies, Jersey, Guernsey and the Isle of Man, and it is frequently argued that the British overseas territories and the Crown dependencies are the largest tax evasion network in the world, so the failure to mention them in a Bill which purports to deal with issues surrounding tax evasion is a major omission. We will be seeking amendments as the Bill goes through Committee. It is frequently asserted that it is not possible to legislate for the British overseas territories and the Crown dependencies, but the Ministry of Justice seems to think differently. This is an issue that we will explore.

The Minister referred to the beneficial ownership register that we are encouraging the overseas territories and the Crown dependencies to introduce, but he must be aware that at least some of the overseas territories are boasting that they are in practice evading the Government’s efforts to get them to set up beneficial ownership registers, and many of them are saying that these registers will not be publicly available. The Opposition insist that if this Government are serious about dealing with tax evasion, they must ensure that the overseas territories and Crown dependencies not only set up beneficial ownership registers, but make them publicly available.

We note that there is little distinction in the Bill between corporate or partnership bodies which facilitate tax evasion, and those that do it routinely and as a central part of their business model. We believe that we should look into a new provision specifically criminalising entities and individuals for whom tax evasion is at the heart of their business model, and punishing them more harshly.

I shall not conclude my remarks on tax evasion without mentioning the Labour party’s tax transparency enforcement programme. We want a public inquiry to examine the loss of tax revenue, and increased powers for HMRC, including a specialised tax enforcement unit. We want to force foreign firms to list their owners and beneficiaries, and we want the introduction of a general anti-avoidance principle and the extension of current rules to cover offshore abuses.

The Bill deals with the important issue of terrorist finance. Those of us who have watched with horror terrorist atrocities all over the world, and here in London, know that terrorism is an existential threat to us and our society. We share the Government’s aims in reducing the terrorist threat, not just to us in the UK but to our allies and interests overseas, and agree that one way of doing this is to deprive terrorists of the financial resources required for terrorism-related activity. Globalisation means that we must constantly update our legal instruments. We note the changes that the Bill will make to the law enforcement and intelligence agencies in relation to investigations of offences under the Terrorism Act 2000, but we will examine these proposals because we are anxious that they do not have too harsh a bearing on genuine charities.

Labour Members support the Bill in principle. We will scrutinise its detail with care. We insist that it is vital that agencies such as the National Crime Agency get the money they need for implementation, because otherwise the Bill will be a dead letter. For too long, London has been accused of being a hub for money laundering, with all its terrible effects not only on the take of our Treasury but on the lives and countries of many of the poorest people in the world. We hope that this Bill is the beginning of a process that brings the curtain down on the era when London could be described as a money-laundering hub, instead ensuring that London and the UK set an example internationally about what can be done to bear down on money laundering and tax evasion.