Finance (No. 2) Bill

Nigel Mills Excerpts

Monday 11th April 2016 Commons Chamber

[Mr Gauke]

Simplification does matter. One of the measures announced in the Budget—it is not in the Bill, for reasons that will become apparent—is the abolition of class 2 national insurance contributions. National insurance contributions are not covered in Finance Bills, but that is an example of a tax being removed—a tax that created a considerable administrative burden for both taxpayers and Her Majesty’s Revenue and Customs.

The Bill also puts the Office of Tax Simplification on a statutory footing. In the last Parliament, the OTS made approximately 400 recommendations, almost half of which have been implemented. The OTS is being strengthened; it has a new chair, Angela Knight, who is already performing a valuable role in leading the debate, and its resources have been increased. I am sure my hon. Friend will follow the OTS’s progress closely, scrutinise its performance and decide whether it is proposing measures that take us in the direction of which he approves.

[Nigel Mills (Amber Valley) (Con)]

Would my hon. Friend welcome the OTS looking at some more fundamental tax simplification measures such as wholesale reform of individual taxation, rather than focusing on small, individual parts of taxes, as a way of moving us to a much simpler tax system more quickly?

[Mr Gauke]

My hon. Friend makes an important point. There is considerable value in the OTS looking at specific areas, but I think there is a case for it looking at broader matters. Indeed, in its reviews—of small business taxation, for example—it is addressing some of those bigger questions.

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[Nigel Mills (Amber Valley) (Con)]

I am grateful to be called so early in the debate. I strongly support the Bill, which will encourage saving, reward work, encourage business investment and tackle aggressive tax avoidance. Those things are exactly what we want to see in a Finance Bill and they are all in this one.

Given that, I cannot understand why anyone would choose to vote against the whole Bill. It seems to be largely because of the changes to capital gains tax and corporation tax. I will go back as far as Gordon Brown’s first Budget after becoming Chancellor, in which he effectively introduced a 10% capital gains tax rate and reduced the corporation tax rate. Perhaps we can remember when we had a Labour Government who at least tried, in the early years, to be friendly to business and encourage investment and growth in this country.

[George Kerevan]

Will the hon. Gentleman explain why the present Chancellor raised capital gains tax to 28%?

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[Nigel Mills]

That was a peril of coalition and a Lib Dem insistence that I am sure we regret strongly, as it appears not to have increased capital gains tax revenues in the way that was intended. It is quite right to move the rate back down to a more sensible level in the responsible way that that has been done.

We should note that every year we have a Finance Bill, and they are quite long, thick and heavy. We keep adding a load of new and complex clauses to our tax system, which is still just behind the Indian one for complexity. I do not think that we have a record length Finance Bill this year, although the Government achieved that twice in the previous Parliament. At some stage, we have to find a way of getting off the merry-go-round of further complicating our tax system every year. We even have a new record now—of adding a new tax every year. We had the diverted profits tax last year; this year, we have the apprenticeship levy, which the Bill recognises is actually a tax. Although those two measures are welcome, we are further adding to the complexity that people have to deal with.

A welcome step in the right direction is that we are making the Office of Tax Simplification a permanent feature of this arena. However, we need to free that office up to do more long-term, high-level strategic work rather than having to focus on what can at times be quite small features of the tax system, which do not affect all that many taxpayers. As the Minister said, it has done good work on small business taxation, but we really need the office to work out how we can simplify the big taxes we have, to make them easier to comply with, make it easier for HMRC to enforce compliance, and make those taxes less burdensome. That was my reasoning, in the previous Parliament, for why we should make the corporation tax system follow accounts, and focus the resources we have on transfer pricing and abusive avoidance arrangements, rather than having to inquire into whether a certain item was capital or revenue, or whether a certain entertainment allowance was right.

Such long-term strategic directions to simplify the system would bring in far more revenue and make the system far more attractive. I hope that the Bill will allow the OTS to choose its own work in some situations. Perhaps it will be encouraged to consider some fundamental simplifications, and not just suggestions made by the Chancellor from time to time.

On individual measures in the Bill that are welcome, the savings and dividends nil rates are an encouragement for people to save, and a welcome simplification of the tax system for many people who struggled to work out how the dividend credit worked and what tax rate they were paying. That moves us in the right direction regarding how we stop people incorporating themselves to get a tax advantage that is not intended by paying themselves dividends, and helps us to get to a fairer system in which people who are employed pay the right taxes.

Some issues have not been raised. For example, the peer-to-peer lending rules are leading the world in encouraging the financing of businesses that cannot get normal financing from banks. There are also welcome anti-avoidance rules such as the withholding tax changes to try to stop treaties being abused so that companies avoid paying the withholding tax they should be paying in paying fees to tax havens.

The Bill does not contain some measures that I would like to be included. For example, we must accept that there is a widespread lack of confidence among the public that our largest corporates are paying all the taxes in this country that they are supposed to pay. I suspect that most of those companies are paying their taxes and that a relatively small proportion are engaging in aggressive avoidance, but everyone gets tarred by the same brush. The measures that we have introduced in the past five or six years to tweak things or introduce new rules and so on, are not tackling the fundamental lack of confidence in the system, which is why we need more transparency from large companies.

We should make large companies publish their tax returns so that we can see a calculation of how they have got from the profit they report to the tax they pay. We should know which companies have made aggressive calculations, or used strange reliefs or funny payments that we do not understand, and which are paying the right amount and happen to have losses brought forward or capital allowances that they have not used. That would boost people’s confidence and we would not see stories every few months about another large multinational that has done something that it should not have done, or done something entirely reasonable, but we do not know because such details are not in the public domain. It would help to move this debate forward if those large companies were more transparent.

Companies have to disclose many things about their directors, investment strategies and business practices, and I do not think that a little more transparency about tax affairs would put much more commercially sensitive material into the public domain. Instead, it would boost people’s confidence. I hope that large companies that are complying with the rules would want to do that—they should not be scared of doing so. If they are using existing rules and incentives for the use that they were intended, that is welcome and something that we all understand. Perhaps the one thing that we can do domestically would be to take this debate forward so that we are confident that our largest companies are doing what we want them to do, and not doing things that they ought not to be doing. With that plea, I welcome the Bill and will be voting for it this evening.

HMRC and Google (Settlement)

Nigel Mills Excerpts

Monday 25th January 2016 Commons Chamber

[Mr Speaker]

Order. I note in passing that over the past few minutes further Members have started bobbing. There is no problem with that, but if it delays the Minister he will know why.

[Nigel Mills (Amber Valley) (Con)]

When the Minister makes large businesses publish their tax strategy, will he also make them publish their tax returns so that we can all see how much tax they are declaring and how they got from their cash profit to that tax bill? That would improve transparency and confidence in the system.

[Mr Gauke]

The United Kingdom’s position on taxpayer confidentiality is hardly unique. Indeed, it is the mainstream approach. Knowing what a company’s tax liability might be depends on a detailed understanding of the whereabouts of its assets and activities, and not all of that information would necessarily be apparent from a straight tax return. As I have said, there is greater transparency now because companies have to set out their strategies, which has never been the case before.

Draft Small Charitable Donations Act (Amendment) Order 2015

Nigel Mills Excerpts

Monday 7th December 2015 General Committees

[Nigel Mills (Amber Valley) (Con)]

May I build on the questions about donations in kind and food banks? When the 2012 Act was debated, I tormented the then Minister with questions about why we were restricting the measures to cash donations. As the world moves on, we will all start using contactless payment or Apple Pay, and there will be many more situations in which one can make a small donation to a charity by walking past and waving one’s card or phone. Yet although that is practically the same as cash for all intents and purposes, under the rules as currently drafted it is outside the scheme, and the charity would have to collect someone’s gift aid details through their mobile phone provider or bank. What people think they are doing in such situations is making a small donation in cash; they just happen to be using a more convenient technological process to do so.

There are many other examples. People can deposit their Oyster cards in a bin at the tube station, and Transport for London takes the balance and gives it to a charity. Again, people are not making a cash donation, but that is effectively what they think they are doing. Three years on, is the Minister more open-minded than his predecessor on revisiting whether we should allow small donations to be extended to cash equivalents in order to capture such situations?

Scotland Bill

Nigel Mills Excerpts

Monday 29th June 2015 Commons Chamber

[Sir Edward Leigh]

That is a good point, and I agree entirely. It does not make sense. One Parliament might be trying to manage its own affairs by setting bands responsibly, but another Parliament could cut the ground from beneath its feet by changing the threshold. I do not know why the power has been reserved, but no doubt the Minister will tell us.

[Nigel Mills (Amber Valley) (Con)]

Does it not go even further? Without the Scottish Parliament having control over the rules and the tax base, the UK Parliament could create a load of new reliefs that would cost it a fortune. If we are going to devolve income tax, we ought to devolve the whole thing, not just part of it.

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[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

As others have said, the genesis of the clause lies in the report of the Smith commission. I have supported the commission since the day, indeed the hour, when it reported, but we cannot ignore the fact that the process was undertaken at great speed. Necessarily, given that five parties were engaged in the process, it involved a degree of compromise all round. It is for that reason that all of us undertook to ensure that there would be consultation following the publication of the report and, subsequently, the draft clauses.

In a debate in which consensus is not always easy to come by, I am pleased to note that there is consensus on the fact that the clause is a faithful replication of the agreement that was reached under the chairmanship of Lord Smith. However, the consultation that has been conducted since the publication of the draft clauses at the end of January has highlighted, and generated, a substantial number of important matters, some of which are technical and some of which go to the heart of the issue of taxation itself.

I suggest to the Secretary of State that further consideration may be necessary. He has the ability, through the good office that he holds, to bring all the parties together again to consider the representations that have been made during the consultation, and to consider whether, given the complexities and possible areas of conflict that could arise, it is actually worth implementing the tax power in the way that is currently envisaged. If the consultation is to be carried out in good faith—and, for my part, it always has been—there are sufficient matters about which we should be talking. That would still allow us—if it were necessary, and if it were possible to construct a consensus—to return to the issues on Report.

[Nigel Mills]

I rise as a reluctant supporter of the devolution of income tax to the different countries of the Union. I agree with the hon. Member for Edinburgh South (Ian Murray) that people throughout the United Kingdom should feel that they are paying the most important tax—the tax that puts the largest amount of money into the UK pot—and seeing it redistributed. We are where we are, however, and we are talking about devolving income tax to Scotland.

I fear that we have one foot in each camp, with part of the tax in this Parliament and part of it in the Scottish Parliament, and that we will end up in a real mess. I am not sure how it is possible to make a tax work when a Parliament can set the rate, the bands and the starting point, but not the actual rules. A particular policy issue in Scotland may mean that the Scottish Parliament rightly wants to incentivise certain employment and income activities. That may not be not a priority for the United Kingdom as a whole, perhaps for reasons of scale or owing to a different approach, but there will be no mechanism enabling income tax in Scotland to promote that certain activity. A new tax relief for people working in the offshore oil and gas industry, for instance, might not be a priority for the UK as a whole, but it might be a priority in Scotland.

The record of our income tax code is cluttered with examples of the use of the tax code to promote certain types of behaviour. I am not sure that we can secure the full and effective use of a tax code if our Parliament is not setting the rate and looking after local activities.

The flipside will be that tax avoidance as a result of a loophole may become material for the Scottish Parliament in the case of a certain piece of exploitation, but will not become material to the budget of the whole UK. It may be extremely important in Scotland to get that loophole closed, but in the UK there may be several others that are ahead of it in the queue, because it does not represent a large loss to the Westminster Parliament. An action that ought to be taken on something that has a material impact in one part of the UK will not be taken because of the strange disparity that exists.

If we are going to start devolving taxes, we should step back and have a look at what a federal UK tax system would be like. We should work out which taxes are federal and which are devolved, and then try to bring about some consistency in Wales, Scotland and Northern Ireland so that similar taxes can be devolved in the same way, rather than adopting a piecemeal approach in regard to corporation tax in Northern Ireland, income tax in Scotland, and so forth. I do not think that anyone in the country will know to which Parliament they are paying what tax, and who has complete control of it. That means that we will not get all the advantages that we expect, such as the ownership and the accountability that my hon. Friend the Member for Gainsborough (Sir Edward Leigh) mentioned.

I do not think that we are achieving the sharing and the pooling that the hon. Member for Edinburgh South wanted, the coherent use of income tax that the SNP wants, or the full devolution that would make sense. We appear to have become involved in a strange halfway fudge which we may regret in a few years’ time. I think it would be better to step back and try to get this right from the start, rather than trying to find a way of clearing up the mess.

I accept that there are always good reasons why the line is drawn where it is. We must be very careful about tax avoidance through the use of residency, or pretend residency. If I am working full-time in Scotland, to get the Scottish rate—which may be higher or lower than the rate in the rest of the UK—I shall probably have to go and live in Scotland. I suspect that I cannot achieve that artificially. If I have large dividend flows, I can probably pretend that I am in Edinburgh when I am in London and vice versa in order to obtain the tax advantage. I can see why there is an attraction in having one UK-wide passive income tax, rather than an active tax.

[Ian Murray]

The hon. Gentleman is raising the issue of what are known in my constituency as “willies”—people who work in London, live in Edinburgh. Those are people who take the trip down to London every Monday and go back on a Thursday evening. According to the House of Commons Library, the UK’s reason for not devolving dividend income is to prevent people from pushing money into dividend income and taking advantage of a differential rate.

[Nigel Mills]

Yes, as I was saying, I accept there are always reasons for drawing the line where we do, and trying to stop tax avoidance within a territory is a powerful reason. However, that has left us here with a convoluted tax system where we seem to be devolving part of it, and that is not a sensible approach. It would be better to have a federal income tax which everyone in the UK paid at a lower rate than they pay now and which covered all passive income, and then have a devolved income tax like the one in the United States. It has a state income tax that can be credited against the federal one. That may be a better, more sustainable system than the one we have.

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[Pete Wishart (Perth and North Perthshire) (SNP)]

The hon. Gentleman is making a thoughtful speech and he has the ears of those on the SNP Benches. He is right that we have got a halfway house and we have got to get this resolved. That is what the Scottish people thought they were voting for when they voted for us in such numbers. Is there anything the hon. Gentleman can do to persuade his right hon. Friend the Secretary of State to listen to what Scotland has said, and to have the proper solution and ensure we do this right and get what the Scottish people voted for just a few weeks ago?

[Nigel Mills]

I have tried to convince the Treasury Minister, my hon. Friend the Member for South West Hertfordshire (Mr Gauke), of various tax reforms over the last five years with, I would have to say, somewhat limited success, so I am not sure my words will help. If we are to achieve a lasting settlement of our constitution, having these tax rules in the right place with everyone understanding them and believing them to be fair will be extremely important. I do not think my constituents will understand how Scotland can set a different rate of income tax from what they pay if Scottish MPs are still able to vote on the English rate of income tax because it applies to passive income and dividend income. I suspect we will get into a constitutional nightmare, and I can foresee a situation in which Scotland chooses a lower rate of income tax than we have in England, and the English taxpayer will, rightly or wrongly, see a subsidy going from England to Scotland through the Barnett formula and then SNP MPs coming here and voting for a higher rate of income tax than their constituents are paying. That is the nightmare we would hate to see.

We need to have a clear devolution of taxes and responsibility, not what I fear we have here: a halfway fudge that we will have to try to fix in a few years’ time.

[The Secretary of State for Scotland (David Mundell)]

May I start by agreeing with the hon. Member for Edinburgh South (Ian Murray) that we should put on record our thoughts for those people who have been caught up in the events in Tunisia, particularly those from Scotland who have perished? Although our debate has been curtailed today, it is right that that matter has been given such due consideration in this House.

I say to the right hon. Member for Orkney and Shetland (Mr Carmichael) that I have considered the various issues raised in the House in the first part of our Committee stage, and I will continue that approach through the further days in Committee.