Finance Bill

Anneliese Dodds Excerpts

Committee: 1st sitting: House of Commons
Wednesday 11th October 2017 Commons Chamber

[Mr Harper]

There are a couple of things in what the hon. Lady says. She is absolutely right that we need to do more to ensure that multinational companies pay tax in the appropriate jurisdiction, but we cannot do that unilaterally. We have to work with other countries, because we need international agreement on where a company’s profits are earned. The media sometimes does not understand this, but companies pay tax on profits, not revenues, so the whole argument is about where the profits land and that has to be addressed internationally. This Government are leading that international work, not following it—[Interruption.] It is no good the hon. Member for Oxford East (Anneliese Dodds) shaking her head. UK tax professionals have been leading this work and continue to drive it forward. We have a proud record.

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

I have seen some of this from the inside, within the European Union. For example, I have seen measures against trusts and measures to introduce country-by-country reporting blocked by Conservative MEPs, and I frequently saw measures to attempt to introduce international co-ordination blocked by Conservative-related politicians.

[Mr Harper]

No. First, it cannot just be done at European Union level—[Interruption.] No, we have to do it globally, because many of the companies involved are US companies. The base erosion—[Interruption.] I do not know why the Opposition Front-Bench team are laughing. The base erosion and profit sharing programme comes from the OECD.

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[James Cleverly]

My hon. Friend is absolutely right. I will respond to her point in a few moments, but it is a very important one and we must not overlook it.

We have had a jobs boom over the past few years, in stark contrast to many other developed economies around the world and across Europe, which has struggled. In particular, in the UK, which is dominated by small and medium-sized enterprises and, indeed, microbusinesses, which often have only one or two principals and one or two employees, it is important that we continue to give confidence to those businesses, many of which do not have a large administrative back-office function. That is often the case, as it was in the business that I started. I was doing the client interaction and sales, and a colleague of mine was doing the journalism side of the business, but we were also the accountants and the HR department. To give confidence to small and microbusinesses that they can employ people, it is incredibly important that everything to do with employment is as simple and transparent as possible.

At the moment, the tax treatments around severance payments are very competitive. Depending on the combination of events, the payment can be taxed any one of a number of ways. Although I did not speak about this set of clauses on Second Reading, I did welcome the Bill, and I welcome this general move to simplify, to clarify and to give small businesses in particular—although of course this affects businesses of all kinds—the confidence to employ people, knowing that the HR and financial treatment around that employment will be as simple as possible.

The Opposition spokesman kept talking as though severance payments were not taxed at the moment, and of course they are. They are taxed—

[Anneliese Dodds]

indicated dissent.

[James Cleverly]

Above the £30,000 threshold, there are tax treatments. Through the Bill, the Government are seeking to make the treatment of the figure above £30,000 most important and straightforward—[Interruption.] I absolutely welcome that.

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[Anneliese Dodds]

The threshold.

[James Cleverly]

Yes, but at the moment it is £30,000, and that is what it says here—[Interruption.]

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[Anneliese Dodds]

I will get straight to the point. Members will not be surprised to hear that many of my concerns have already been raised by the hon. Member for Aberdeen North (Kirsty Blackman). Labour Members have expressed a number of concerns many times about the extension and scope of business investment relief, to no avail. We find it very concerning that in a context where the current Government have borrowed more than any Labour Government ever have, our Treasury is intentionally depriving itself of revenue. That might be acceptable if the deprivation served to boost our economy, but we have no evidence of any positive impact from business investment relief.

Government Members have stated that they know the raw figure for how much has been invested through this relief. That is correct. We kept calling for that, and finally, at the last minute before we started debating the Bill after the summer recess, we got some figures. They were rounded up to the nearest hundred, and when we are talking of only about 400 people, it is rather strange not to have more granularity.

That is just the figure for the overall amount that has gone through this relief. We have not been told which sectors the investment directed through this relief goes into. We have no clarity about whether, for example, funds invested through this relief might have contributed to the overheating of the British property market in high-cost areas, and we have not received any assurances that the funds going through this relief will help to promote the increase in business and human capital formation that we so desperately need, given Britain’s falling productivity.

The Government’s impact assessment published when this relief was brought in said that it would have a negligible impact on economic development. This is not a relief that has a proven beneficial impact. Until the Government accept our proposals and agree at least to review the operation of the relief, I will remain unpersuaded that its extension does anything other than offer yet another concession to non-doms and provide even greater scope for tax advisers to indicate how UK taxes can be avoided. That is why the new clauses call for a review.

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[Mr Harper]

The hon. Lady made a relevant point in the previous debate that I did not mention at the time. Some of the things that we had to deal with early in the last but one Parliament involved multinational tax arrangements that were put in place under the previous Labour Government. We did our best to get at least some money from those multinationals. It was not enough, but we did at least move things in the right direction. Profit shifting can only be dealt with internationally by agreement. If we do not do that, we will not make any progress. As I said in the previous debate, we are leading that international effort, which did not happen under the Labour Government.

[Anneliese Dodds]

I am sorry, but it is not the case that Governments are completely unable to do anything unilaterally to prevent profit shifting. They can, for example, decide whether to execute secret sweetheart deals with large multinationals through their tax authorities, or they can decide to be transparent.

[James Cartlidge (South Suffolk) (Con)]

Is the hon. Lady seriously suggesting that, under a Labour Government, HMRC would never negotiate with a company over its tax bill?

[Anneliese Dodds]

I referred to secret sweetheart deals, of which the experience in this country has been negative. The problem is with transparency. It is important to have an open tax system that allows for discussion, but many commentators would suggest that the relationship between some of the tax authorities and some of the companies they deal with is too cosy. The problems here are not to the same extent as those in many other countries, but we need to do something when the revenue from companies, particularly those focusing on intangibles, is going down.

One way to do that is to work with other nations, but we have again seen many negative developments in that area. The right hon. Member for Forest of Dean suggested that that was uniquely down to measures promoting a particular rate of tax, but that does not bear witness to what occurred. For example, the Government pushed strongly to prevent trusts from being included in registers of beneficial ownership. That is not about tax rates; it is about transparency. Again, when Conservative MEPs voted against country-by-country reporting, that was not about tax rates; it was about transparency.

Many of the most significant developments to remove harmful tax arrangements, particularly those exploited by multinational companies, occurred under Dawn Primarolo, who was a Labour representative when she chaired the multinational code of conduct group in which dozens of harmful tax practices were identified and removed. Labour therefore has a clear and strong record in dealing with these matters.

The Opposition will do everything we can to remove the gaping loopholes that still exist in the Bill, to toughen measures against aggressive tax avoidance and to prevent the burden being placed on some of the biggest casualties of austerity: those workers who have been made redundant. I hope that the Government will pay heed. In the interests of the British economy, they need to.