Tax Avoidance and Multinational Companies
Richard Bacon Excerpts(8 years, 11 months ago)
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Mr Gauke
I will deal directly with the issue of transparency in a moment.
On the issue of how our international tax system works, I have explained that it is based on economic activity. However, I would be the first to say that that international tax system needs to be brought into the modern world. That is the very reason why the UK has led the way on the base erosion and profit-shifting process. We should also be aware that there are particular issues with the US tax system, which is failing to tax intellectual property developed in the US in the way that it should.
I gave the example of video games companies. However, I recognise that there are many cases that are much more complex, and where it is not so easy to identify where the economic activity takes place. There is an issue about where multinational companies allocate their profits and where they identify economic activity as taking place. There is a need to address that, which is why we need tax rules that genuinely reflect where economic activity takes place, to ensure that profits are aligned with it. However, that is a very different matter from making big claims about profits from sales and saying that those sales profits have to be taxed where the sales take place. That is the misunderstanding I wish to address.
Mr Richard Bacon (South Norfolk) (Con)
The Minister is right, of course, that these issues are sometimes very complicated. However, sometimes there are loopholes that are exploited. Will he identify some of the loopholes closed by this Government that were opened by the previous Labour Government?
Mr Gauke
There is a whole host I could draw attention to, but in the interests of time, I will not run through that lengthy list. I have it here, and there are quite a number of cases—there are 40 I can identify straightaway—where there were loopholes, and we have tried to address that.
The diverted profits tax—I will come back to this again in detail in a moment—is designed to ensure that, where companies divert their profits away from the UK, and where the economic activity is happening in the UK, we get some of the tax yield.
Roger Mullin
Many people throughout Britain will think that the hon. Gentleman has made a very fair point. That is why I have been arguing that we must have a proper investigation and why, perhaps in the longer run, we need to do something about greater transparency. It will be very difficult for us to bring a proper critique to bear if we do not get such clarification.
It must, of course, be admitted that this is not a new phenomenon. I first became aware of concerns about multinationals paying their fair share of UK taxes back in the early 1970s, when I briefly worked for the multinational IBM, and I am aware of concerns predating that. This has not been going on for just one or two years; Governments have not been able to resolve this issue satisfactorily for decades, which emphasises its complexity. The issue has been around for a long time, regardless of whether this country had a Labour or Tory Government and regardless of which parties formed Governments in many other countries.
I remember that the concerns back in the early 1970s were about what was called “transfer pricing”. For example, a company could buy a handle from a parent company in another country and charge an exorbitant fee for it, which allowed them easily to transfer profits from one area to another. I would be the first to admit that there have been moves to tighten up many such matters since the 1970s, but it remains a fundamental problem to this day. Corporation tax seems to be very susceptible to avoidance by multinational corporations because of the way in which they can, quite legally, operate.
Mr Bacon
The Public Accounts Committee found that HMRC as a whole had only 65 specialists in transfer pricing, which was about the same as each of the big four accounting firms. Does the hon. Gentleman welcome this Government’s introduction of more transfer pricing specialists in HMRC?
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. May I say to hon. Members who wish to speak but are now making interventions that I assume they will not mind if they go to the bottom of the list because they have almost used up their time?
Mr Richard Bacon (South Norfolk) (Con)
I will be brief.
The hon. Member for Wythenshawe and Sale East (Mike Kane) said that paying corporation tax was an optional extra. If he is right—and there are some good arguments for why he might be right—it is because of the unbridled complexity of the system. I used to carry a number in my head: I thought that the tax code was 11,000 pages long. However, when I went to a Public Accounts Committee tax conference organised by the right hon. Member for Barking (Dame Margaret Hodge)—the Dame Professor Lady right hon. Member for Barking—I discovered that it was 17,000 pages long, and I was told on the radio yesterday that the figure might now be nearer 20,000.
If we made the Bible 10 times longer, we would not expect there to be less work for theologians. We need to sort this out. Complexity is not always avoidable in a mature economy, but there are steps that can be taken to make the code simpler. The Office of Tax Simplification examined 155 different tax reliefs and recommended that 47 should be abolished—43 actually were abolished—but over the same period, the Government of the day introduced 134 new reliefs. According to the Office of Tax Simplification, that produced a total of 1,140. Incidentally, HMRC had thought that there were only 398, which shows how extraordinarily complex the system has become.
That is the central problem, and it needs to be tackled. If a system that can only be dealt with by a high priestly caste is combined with a global economy, a country will get what we have got. It was this Government who introduced the idea of an Office of Tax Simplification, and it is this Government who are starting to do something about flattening and simplifying the tax system.
There is also the question of the cost of tax reliefs, which is sometimes much higher than HMRC expects. When the right hon. Member for Barking was the films Minister, for very good reasons she introduced a film tax credit. She was then horrified to discover that, using the law of the land, some very clever entrepreneurs and accountants were going around doing things which bore some relation to UK film activity, but perhaps too tangentially for the right hon. Lady’s taste. Much of what had been done was found by the courts to be within the law, and ended up costing HMRC, and taxpayers, hundreds of millions of pounds more than had been expected.
This Government are starting to tackle the problem. They have not made all the progress that they need to make, because this is a very big problem indeed, but at least they are starting to tackle it. The last Government did not collect the tax, but this Government are moving in the right direction, and I commend them for what they are doing.
Housing and Planning Bill (First sitting)
Richard Bacon Excerpts(9 years, 1 month ago)
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The Chair
I welcome you all to the first Committee sitting of the Housing and Planning Bill. I hope to keep our discussions pleasant and civilised. There are a couple of little rules. We are not allowed to have coffees, or to drink or eat anything else, and if anyone’s mobile phone goes off they will earn my strict displeasure, or a wiggle of my eyebrow at the very least.
Before we begin the more interesting part of the sitting, I ask Members who have interests to declare now to do so.
Mr Richard Bacon (South Norfolk) (Con)
I am organising a seminar on 20 November called “How should Norfolk grow?” It has eight commercial sponsors: Barclays bank, the New Anglia local enterprise partnership, the local train franchise, Anglian Water, Saffron Housing, Norwich International airport, Swallowtail Print and the Maids Head hotel.
The Minister for Housing and Planning (Brandon Lewis)
May I draw attention to my entry in the Register of Members’ Financial Interests?
Matthew Pennycook
Q 8 As the Bill stands, have you been assured that they are an addition and will not simply squeeze out other affordable housing in the capital?
Richard Blakeway: A number of the key points will be articulated in the regulations. What is on the face of the Bill at the moment means that starter homes can certainly work alongside other intermediate products in the capital. The key bit will be what is in the regulations. One of the key issues is the quota of starter homes that will be required, which will be articulated in the regulations. There has been speculation that it will be 20%, but we are waiting to see the regulations. It is important that they work alongside each other. Just to pick up on your point, we have a number of intermediate products where the investment is locked in in perpetuity, and we would like to see that continue.
Mr Bacon
Q 9 Mr Blakeway, what possibilities are there for the provision of serviced plots within the GLA area for people who wish to build their own home, either individually or in what the Self-build and Custom Housebuilding Act 2015 calls “associations of individuals”, who come together to build their own houses?
Richard Blakeway: We think there is a real role for both custom build and self-build. On the identification of plots, we are working closely with local authorities to compile a list of potential sites. In addition, the GLA is acting as one of the Department for Communities and Local Government’s vanguards and establishing a register of people with an interest. We are seeing a phenomenal rate of interest in London: more than 600 people have signed the register in the past three months. People often look at London and say that custom build and self-build cannot work in the capital, but we do not believe that is the case. We think it has a role to play in the capital—particularly in outer London. We also think that custom build, in particular, has a role to play among conventional house builders and housing associations. There is absolutely no reason why you cannot reserve a proportion of plots for custom build on a large regeneration scheme or development site.
Mr Bacon
Q 11 In relation to large cities, Berlin has more than 3,000 dwellings that have been developed very recently using self-build and custom house building. Are you saying that in large urban areas such as London it is not a problem to do it in the way that some people are suggesting?
Richard Blakeway: It is more challenging because we have a very heated land market and development opportunities tend to be more complex, but it should not be dismissed. We think it has a particular role to play, for example in outer London where the kind of density that might be built through custom build and self-build is appropriate to the local vernacular.
Dr Roberta Blackman-Woods (City of Durham) (Lab)
Q 12 Are you certain that the sale of high-value council housing will yield enough resource to fund the right-to-buy scheme? Do you think it will guarantee that enough houses are built?
Richard Blakeway: Certainly within London, our analysis—and we have had some support from Savills on this—suggests that there are sufficient capital returns and receipts from the sale of high-value council houses in the capital to cover the cost of discounts in the capital and the cost of reprovision, as well as other things such as debt financing and so on. The straightforward answer is yes, within London.
Matthew Pennycook
Q 36 You say there is an acceptance that some of the proceeds will leave the capital. Do you think, therefore, that the amendment tabled by the hon. Member for Richmond Park (Zac Goldsmith) to keep the proceeds within London is unrealistic?
Philippa Roe: I would like him to see it succeed. Whether the Government will accept that, given the financial pressures they will face with right-to-buy sales outside London, I do not know. It is worth trying, but I am not sure whether he will succeed.
Mr Bacon
Q 37 Councillor Glanville, you said that you want to build, in your authority, affordable housing on land that you own. You emphasised the importance of exemptions. Are you promoting housing co-operatives as a way of delivering affordable housing? Perhaps the other witnesses could answer for their own authorities.
Phil Glanville: To answer that question, we have quite a few housing co-operatives within the borough already. They tend to be managing existing stock that they have been bequeathed through CPOs in the past and through the squatting movement in the ’70s and ’80s. As far as I am aware, they are not currently seeking to develop. We are focusing on working with housing association partners and our own new build programme that will deliver 3,000 homes over 10 years, 52% of which will be truly affordable. The rental properties there will be council rented homes on our land, making best use of our assets. We are bringing forward 18 sites. In fact, the borough is the largest house builder of any kind within Hackney, including building homes for sale, which is important as we are not against building homes for sale or for low-cost home ownership; we just do not think that the Bill will help with that process in boroughs such as Hackney.
We are also doing regeneration with our partners. We are tripling the density of an estate called Woodberry Down in the north of the borough, where we are building 5,500 homes over the next 20 years. We have no lack of ambition to develop such homes within the borough. With some of the freedoms that Councillor Roe mentioned around the HRA, we could do a lot more.
Mr Bacon
Q 38 To be clear, for the land that you own on which you plan to build affordable housing going forward, the council is not proposing that those be held as housing co-operatives.
Phil Glanville: No.
Sir Steve Bullock: We also do not expect some of our existing housing co-operatives from that historical period to play a significant part going forward, although we are doing other things. Harking back to an earlier question, we have literally just agreed on a scheme for self-build. However, there is an issue with a number of these alternative approaches that is simply about scale. To get the volume of units that we need, we are having to build in thousands, rather than tens and hundreds. However, we have a housing association that is owned by the tenants, which is now beginning to develop itself. We think that that is potentially a useful development going forward.
Mr Bacon
Q 39 Could you clarify what you meant by “scale”?
Sir Steve Bullock: The housing co-ops tend to be very small. We are talking about building 15,000 additional units of housing in Lewisham over the next period. They would not be in a position to build anything like those kinds of numbers.
Mr Bacon
The existing housing co-operatives.
Sir Steve Bullock: Yes.
Martin Tett: I represent the LGA, rather than an individual borough, so it is probably better if I defer to Councillor Roe on this.
Philippa Roe: Similarly, we have big regeneration plans in Westminster. Everybody thinks that Westminster is extremely wealthy, but we actually have four of the poorest wards in the country with extreme deprivation in them. We have massive regeneration plans for those areas, but it will be us, the council, driving that regeneration programme. We will work with the housing associations that happen to have properties in those areas, but it will be mainly driven by the council, working with the private sector. Again, we will be building market housing to help fund the whole scheme, intermediate housing and social housing.
Mr Bacon
Q 42 Given that there is a lot of concern about right to buy, I am puzzled why authorities that wanted to protect affordable housing would not use the housing co-operative route as an obvious exemption. It is certainly obvious from international evidence that it can be done at scale using housing co-operatives.
Philippa Roe: It has crossed our minds as a route that one could look at.
Mr Bacon
You might want to look at Berlin.
Phil Glanville: Returning to what Mayor Bullock said about scale, it is the scalability of the housing co-ops that exist in London that makes it challenging. We are looking at working with, say, the almshouse movement to build new, affordable homes that are also exempt because people are beneficiaries rather than tenants. Where we can innovate on our land, we will do so, but the scale of the crisis in terms of the thousands of homes that we need to build makes it difficult to use the co-op movement as it is currently constituted.
Kevin Hollinrake
Q 43 The National Audit Office recently produced a report saying that some local authorities had reduced their budgets for planning and their planning departments by up to 50%. The Bill contains a number of changes that should expedite the planning process. Will this mean that authorities are more likely to staff up their planning departments with the right number of competent people to be able to turn round applications?
Philippa Roe: The absolute key to having the right staffing within our planning departments is to be able to charge a fee that covers the cost of expediting the planning process. At the moment, we cannot charge anything like enough to cover that cost, so basically our council tax payer is subsidising the developers. We are very lucky in Westminster, because of where we are. We have a Westminster Property Association, which funds six planners, to whom its members have access. We can pay appropriate salaries to attract good people, but they are limited to the Westminster Property Association members. I think other local authorities struggle, as we struggle with the rest of our planning applications. As was mentioned earlier, our good people who have Westminster experience are very valuable in the private sector, and they are being hoovered up. We cannot keep them unless we can pay them the appropriate salaries. We really need planning fees to be raised.
Martin Tett: I completely support Councillor Roe on this. There is an almost universal plea from local authorities, whatever their political complexion, that they be allowed to recoup the costs of planning with appropriate planning fees. That would do a great deal to help us to resource up. I also re-echo the point that some of the salaries that the private sector pays good, experienced planners are very high compared with what local government can pay. It is a real challenge.
European Union Referendum Bill
Richard Bacon Excerpts(9 years, 6 months ago)
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Mr Clarke
In a moment. Why on earth should a Minister not be allowed, as a Minister, to advocate that people might be encouraged to vote? As the hon. Member for Ilford South (Mike Gapes) rightly asked, would a Minister who goes to Brussels for a difficult meeting on an aspect of agricultural policy or of the research and development budget be told by his officials that they would melt away the moment he expressed a view on an issue that might have been raised by my hon. Friend the Member for Stone or me in the referendum campaign?
I think we have received genuine undertakings. Everybody wants a fair referendum, so let us not resort to the legalism of section 129—[Hon. Members: “Section 125!”] That shows my regard for legalisms, despite my being a lawyer: section 125 is very important! When we get to Report, let us take a considered look at what would happen if we threw the whole weight of the law at this issue and had one of Her Majesty’s judges adjudicating on whether the pronouncements of some Parliamentary Secretary in Brussels had broken the statutory injunctions and he should have been reduced to silence.
Mr Richard Bacon (South Norfolk) (Con)
May I say how much we are enjoying my right hon. and learned Friend’s speech? His casual wafting around of various sections, whether they are the right ones or not, reminds me of one of those lovely days when he said that he had not bothered to read the Maastricht treaty. Will he clarify something that seems to be a bit of a caricature? He says that the whole of Government would have to be closed down and that Ministers would not be able to engage in any business at all, but surely that could only possibly be true if the European Union was so involved in every nook and cranny of this country’s affairs that it could not possibly function without those relationships. Is not that the whole point?
The Temporary Chair (Sir Roger Gale)
Order. Before we proceed, in case there was any implied criticism, I have to say that, although the right hon. and learned Member for Rushcliffe (Mr Clarke) might be rambling around the European Union, this is a broad-ranging set of amendments. I have listened to him very carefully and he is, in fact, in order.