Tax Avoidance and Evasion

Debate between Robin Walker and Robert Jenrick

Wednesday 13th April 2016 Commons Chamber

[Robert Jenrick (Newark) (Con)]

Like the hon. Member for Newport West (Paul Flynn) I thought that the most important thing to come out of the Panama papers was the revelation of criminality and corruption here and abroad. I hope that HMRC and authorities around the world will take note and bring prosecutions, and that that will lead to further crackdowns on corruption, including in places such as China, where I would not like to be one of the individuals named in the Panama papers. It is right that the authorities should take action.

Like my hon. Friend the Member for Bracknell (Dr Lee), I believe that this issue cuts to a question of trust, but the antidote to mistrust is not moralising or phoney outrage; it is credible, practical action that makes a difference and which the public can believe in. That is what the Government have been doing. Just because some Members of the House or the media have not followed this issue; just because the right hon. Member for Islington North (Jeremy Corbyn) did not say anything about this matter during 13 years of the Labour Government; just because he sat on the British Overseas Territories Bill Committee and did not raise any issues of tax evasion; and just because he referred to the Labour Government taking control of the Turks and Caicos Islands as “medieval” and “extremely undemocratic”; and just because others have taken their eye off the ball, it does not mean that the Prime Minister or Government have done the same.

Let me say a few words about the key things that the Government have done, many of which have already been mentioned. Raising the issue of tax evasion at the G8 summit and creating the world’s first public beneficial register of ownership was a major historic development. Many campaigned against it, actually for perfectly legitimate reasons, such as that it is a massive invasion of the privacy of law-abiding people. However, it is a huge step forward in the campaign against tax avoidance and evasion. It is happening in this country first, and we should be proud of that and not make it seem as if it is something that we take for granted. This Government were the first to do that, and other major economies around the world, like the United States, have not done that.

In one month the all-party group on corporate governance, which I help to run, will bring Chief Justice Leo Strine, who runs the Delaware Supreme Court, to Parliament. If Members care about this issue, and if this is not just phoney outrage, they should come to that event and question him about why Delaware—the state in which 90% of the major corporations of the United States are registered—has not yet followed the lead of this Prime Minister. We should encourage him to do the same.

The general anti-avoidance law was another major and controversial measure taken by the previous coalition Government. It was opposed by the Labour party. At the time, the Labour party spokesman said it was inadvisable to take this action until after the conclusion of the base erosion and profit shifting process, so it would not have happened under a Labour Government. It happened under a Conservative and Liberal Democrat Government.

[Mr Robin Walker]

My hon. Friend is making a very interesting point. May I add another initiative which, to be fair, was an initiative of the previous Labour Government? The extractive industries transparency initiative was brought in by Labour, but it did not sign the UK up to it. This initiative is very important for raising tax revenue not just in the UK but around the world, and for making sure there is proper transparency as to where the extractive industries pay their money. Many of us, cross-party, campaigned for that. The Business, Innovation and Skills Committee said it was a mistake for the previous Government not to have signed up to it. This Government have, quite rightly, taken us into it.

[Robert Jenrick]

The point my hon. Friend makes is that practical and credible policies are the way to tackle this issue. We have seen results, contrary to some of the accusations we have heard today. According to the latest HMRC figures, the tax gap was higher in 2009-10 than it is today. The tax gap for corporations, large and small, was 40% to 50% higher. The tax gap for stamp duty was 40% higher under the previous Labour Government than it is today. Loopholes have been closed and practical measures are being brought in. By no means is this the end of the story—of course there is more to do—but I am pleased to say that the UK Government are genuinely leading the world on this issue. I want to see them do a lot more.

Lowering taxes is another important element in encouraging good behaviour, both by individuals and corporations. Corporation tax at 17%, versus 30% in the United States, will be a major step forward. Only the other day, President Obama was forced to take action against Pfizer because of its motivation to move to lower tax jurisdictions because of the 30% corporation tax in the United States.

There is more to do. I do not stand here for one minute claiming that this is mission accomplished, but we have to be clear that a lot of good steps have been taken. It is bad for business to have tax havens operating as they do today. Let me give Members a brief example from a previous career I had working as a managing director of an art business. Many valuable works of art are held in Panama and other such places. One dispute, over the ownership of a painting that had probably been seized by the Nazis, lasted for four years. The likely owners claimed that they did not know anything about the painting or who owned it. That has been revealed, thanks to the Panama papers, to be an outright lie. The Nahmad brothers, global collectors of art, were revealed to be the owners. I suspect that that painting will finally be going back to its legitimate owner in the near future. Tax havens operating as they do today is bad for individuals and bad for business, particularly in such disputes.

I want to close by commenting on tax privacy, an issue raised both in the press, by Polly Toynbee and others, and by my hon. Friend the Member for Bracknell. I think this would be a seriously detrimental step for the privacy of individuals in this country and all over the world. The last major occasion I can think of when this occurred in a large developed economy was during the civil war in the United States. To try to encourage compliance when income tax was introduced, tax returns were posted on the walls of courthouses across the United States. It was one of the most unpopular policies in the history of the United States and it did not increase compliance. The Secretary of the Treasury, Andrew Mellon, said:

“It was utterly useless from a Treasury perspective, just the gratification of idle curiosity and filling of newspaper space.”

Setting aside Prime Ministers and politicians, let us defend the right of individuals in this country to have privacy in their business and financial affairs. The legitimate, law-abiding citizens of this country should not be the losers from some individuals taking part in criminal acts.