Finance Bill
Debate between Andrew Mitchell and David Gauke(8 years, 4 months ago)
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Mr Gauke
I think that the principle and the destination are pretty clear. We are moving in the direction of companies’ publishing this information, and I believe that the UK should be leading the way in working out a multilateral deal in which a number of countries impose essentially the same requirements. That, I think, would help to improve transparency and would provide a level playing field.
I do not think that the UK should be the last mover in this respect by any means. The United States seems to be some way away from moving in this direction, and I do not think that we should wait for the United States; I think we should be there before it. We should be able to deliver, especially given that such good progress is being made at European Union level. We remain members of the European Union, and there is appetite for this in other EU states. I have no doubt that, if no progress has been made in a year or two, the right hon. Member for Don Valley will come back and ask, “Why has this not happened?”, and in that event her case would be strengthened. However, I think that until we have given the deal a fair wind, it would be premature to act unilaterally.
Mr Andrew Mitchell (Sutton Coldfield) (Con)
The Minister has a perfectly justified and extremely good reputation for being sympathetic in driving this agenda forward. He will recall our discussions, both in opposition and back in 2010, about precisely the point that is addressed in the amendment. We all agree that companies should pay tax where their profits are earned.
The Minister knows as well as I do that some of the poorest people in the world live on top of some of the richest real estate, and that extraction taxes should be paid where those profits are earned. May I ask him to respond fully to the point that is being made by the right hon. Member for Don Valley (Caroline Flint)? If he thinks that her amendment is defective in some way, will he commit the Government to looking at those defects and considering whether they can frame a clause that would address the first part of what she said, with which I understood him to say he agreed?
Mr Gauke
The Finance Bill is not the ideal way in which to address this issue fully. I make no criticism whatsoever of the right hon. Member for Don Valley, who has shown much ingenuity in managing to ensure that her amendment is in order, but this is essentially an issue for company law.
We are keen to implement public country-by-country reporting, and we want to do it on a multilateral basis. As I have said, if there was a lack of progress the Government would obviously want to return to the issue, given the concerns that I think are felt by Members in all parts of the House. However, I think that we are in a position to aim for what I am sure we all agree would be the best result: achieving our aims on a multilateral basis.
Mr Gauke
My hon. Friend is right to mention the fact that we went ahead with the diverted profits tax, although doing so was clearly consistent with the direction of the base erosion and profit shifting process. That tax also brought in significant revenue to the UK, which has been very helpful.
If we want to achieve greater transparency, as I believe we all do, it is right that we focus on driving forward international efforts on public country-by-country reporting. In order to get full information on foreign multinational entities’ global activities, multilateral agreement will be required to enable countries to introduce comprehensive rules with the widest possible scope. This will allow for a comprehensive multilateral approach that applies consistently across UK and foreign multinational entities. We must get this right so that, when it is introduced into UK law, it is effective and enforceable. We will continue to support and drive this multilateral change forward following the result of the referendum, and I share the determination of the Members supporting this amendment not to move at the pace of the slowest.
Mr Mitchell
The Minister is being extremely generous in giving way. I am sure we all agree with him that this should be done multilaterally—there is nothing between us on that—and I am sure that it will be helpful to his aim of being able to demonstrate strong support for this across the House of Commons when he is dealing with his international partners. I should like to make a suggestion, and I hope that it will be helpful. Would he consider asking his officials to draft a clause for public discussion that is not defective and that he could put to his colleagues multilaterally as a measure that they might wish to include in their parliamentary legislation?
Mr Gauke
I am grateful to my right hon. Friend for that suggestion. Let me take it away, because there are a number of ways in which this could be done, and we would want to consider it. I believe that this debate will be helpful to our parliamentary and governmental colleagues in other jurisdictions in that it demonstrates our cross-party determination to make progress on this matter. We are committed to acting swiftly to implement international agreements, as we have done with the OECD BEPS recommendations on country-by-country reporting. We are committed to improving the transparency of multinational tax affairs, but we support an effective multilateral approach. At this time of increased uncertainty, a domestic measure of the sort being discussed today would, I fear, disadvantage UK business for the reason that I outlined. I look forward to hearing the contribution of the right hon. Member for Don Valley, but I hope she is satisfied with the assurances that I have provided today.
Clause 150 and schedule 20 create new civil penalties for those who have deliberately assisted taxpayers to evade UK inheritance tax, capital gains tax or income tax via offshore means. The bill introduces a financial penalty of up to 100% of the tax evaded and public naming in the most serious cases.
I want briefly to respond to Opposition amendments 19 and 20. The intentions of amendment 19 seem twofold. The first would ensure that it is considered enabling to act as an introducer. Schedule 20 already covers acting as an introducer, so that part of the amendment is unnecessary. The second aim is to set a test to check whether it objectively appears that the adviser should have known that the advice was likely to enable offshore tax evasion and is therefore an enabler. The test would introduce a great deal of uncertainty, meaning that it would be unclear how much due diligence should be completed.
Similarly, amendment 20 proposes a test that would ask whether the adviser wilfully or recklessly failed to make inquiries that a reasonable and honest person would have made. The courts generally recognise that knowledge includes so-called “blind-eye” knowledge—where a person has a firm suspicion about specific facts and deliberately decides not to find out more about them—meaning that an enabler cannot bury their head in the sand. If they have good reason to think that they are assisting evasion, failing to make proper inquiries will not help them and they will be penalised under the schedule as it currently stands. Given the restrictions and uncertainty that amendments 19 and 20 would introduce, I urge hon. Members to reject them.
Clauses 151 to 153 and schedules 21 and 22 strengthen the civil sanctions levied on offshore tax evaders. Clause 151 will increase the minimum penalties for deliberate offshore tax evasion to 30% of the tax due. The current minimum penalty is 20% and the maximum penalty will remain up to 300% of the tax due. The clause will require offshore evaders who are seeking to minimise or reduce their penalty to provide more information about their evasion and enabling activities in co-operation with HMRC.
Clause 152 removes the protection from being publicly named for deliberate offshore tax evasion unless an offshore evader comes forward to HMRC voluntarily and makes a full disclosure. In addition, clause 152 allows HMRC to name the individual who controls a company or entity that has participated in offshore tax evasion.
Clause 153 introduces a new asset-based penalty that will apply to the most serious cases of deliberate offshore tax evasion, where the tax loss exceeds £25,000, and will levy a penalty of up to 10% of the value of the asset connected to the evasion. Such assets could include physical property, intellectual property, shares and bank accounts. The asset-based penalty will be levied in addition to any other tax-geared penalties and interest due. Taken together, the measures will provide HMRC with a greater understanding of tax evasion while significantly increasing the penalties on tax evaders and those who help them.
New clauses 5 and 6 concern the reporting of a number of offshore tax evaders who have been named by HMRC and the number of asset-based penalties levied within a year of the passing of this Bill. The asset-based penalties are expected to apply from the 2016-17 tax year and the strengthened naming provisions are expected to apply from the 2017-18 tax year, with the first details published under this clause expected to be in 2019-20. As such, there would be no time for the activities covered by the amendments to have happened by the deadlines set for the Government to report on them.