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.

--- Later in debate ---

[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.

Finance Bill

Anneliese Dodds Excerpts

Tuesday 12th September 2017 Commons Chamber

[Mr Harper]

My hon. Friend makes a very good point, and he is exactly right. This was one area in which the debate about corporation tax rates during the general election campaign became rather confused. The Opposition kept saying that we were cutting corporation tax, and making it sound as though we were therefore going to collect less revenue. What we were doing, of course, was to reduce corporation tax rates. The purpose of doing so was to collect more corporation tax revenue, both to attract more businesses to locate in the United Kingdom and to enable the businesses that are already here to be more successful. That is an admirable aspiration but it is, as my hon. Friend said, what has happened in practice.

One of my concerns about the Labour party’s plans is that an increase in corporation tax rates would lead to the collection of less corporation tax revenue; and we would have less money, rather than more, to spend on our public services and our hard-working public sector workers. [Interruption.] I see Opposition Members, including those on the Front Bench, shaking their heads, but since we cut corporation tax rates, we have collected more corporation tax—

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

indicated dissent.

[Mr Harper]

It is no good the shadow Minister shaking her head. The fact is that that is exactly what has happened. We are in the business of collecting revenue to spend, not putting up rates to punish people in order to make ourselves feel good.

Ways and Means

Anneliese Dodds Excerpts

Ways and Means resolution: House of Commons
Wednesday 6th September 2017 Commons Chamber

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

Sadly, today’s debate on the Ways and Means resolutions has confirmed in the field of taxation something that many of us feared about the Government’s general approach to public policy: no genuine attempt is being made to face up to the enormous challenges facing our country, from our yawning productivity and investment gaps to the haemorrhage of public funds caused by tax dodging and, as many have noted, the uncertainty caused by the Government’s shambolic approach to Brexit.

We end this debate with new revelations, hot off the press, that the Government have been pleading with businesses to publicly back their Brexit negotiating strategy—pleas that have been met with “fury” and “incredulity” from business. Against that backdrop, rather than the wide-ranging changes that are required, we have a clutch of measures that I would describe as piecemeal, although I have to say that I liked the epithets used by my hon. Friend the Member for Ilford North (Wes Streeting), who described them as thin and patchy. Many of the measures are, sadly, ill thought through, and they could have a range of negative consequences.

The process is also flawed. Despite repeated calls from tax experts for more detailed scrutiny of tax measures, the House is being rushed into Second Reading of the Bill containing these measures just next week. I accept the Minister’s comments that all these measures were published previously. However, several of them have been pulled, some at very short notice. As my hon. Friend the Member for North Durham (Mr Jones) set out—at length, I must say—some of those measures were important ones.

Such is the lack of coherence in this package of measures that some might describe the current coalition of chaos as rudderless, but I would say that is unfair, because the resolutions show that the Government’s shaky ship tends to list in one direction: towards the protection of the most privileged. As so many of my hon. Friends have mentioned, we see that first of all in the Government’s approach to non-dom status. That anomalous and old-fashioned status was created by William Pitt the younger, and it provides for some of the very richest in society privileges of which British mere mortals cannot avail themselves. Rather than fundamental abolition or reform, here we have the introduction of more and more complex rules.

We heard repeatedly today from the Government that they are closing the front door to tax avoidance from non-doms, but, as others have mentioned, that front door will close at a glacially slow pace. It will be open for another 15 years. In any case, while the Government maintain that they will—albeit very slowly—close the front door to tax avoidance, some of the measures proposed here open up new, hidden back doors through which non-doms can shift their tax responsibilities.

Many Labour Members have talked about the mechanism of business investment relief, which will be extended substantially beyond its initial remit. We have asked repeatedly for evidence of its efficacy, but evidence came there paltry little, and only very late in the day. It was only last Friday that we received a statistical commentary providing some very basic figures on the use of business investment relief, and the figures that we were initially given were rounded up to the nearest hundred. That is surely rather unusual when we are talking about fewer than 450 new individuals taking up that relief in 2014-15. In fact, according to my calculations, less than 1% of non-doms currently appear to be taking it up.

Furthermore, as many others have mentioned, the Government have provided no indication of which sectors or businesses are benefiting from this relief. Without that information, it is unclear why the Government have chosen to extend its remit. As my hon. Friend the Member for High Peak (Ruth George) mentioned, we also need to know why the Government are now enabling non-doms to buy shares traded in secondary markets, not just new shares, under the remit of the relief. How exactly will that benefit the real economy and generate the investment that we desperately need?

The new measures have been proposed in a context where, according to a statistical release we have only just received, more than 54,600 non-doms have been in the UK for seven of the past nine years, but only 5,100 seem to have admitted remitting income to the UK. Having said that, the exact number of non-doms in Britain seems to go up or down by 200 depending on which table is looked at in the statistical release, so we should perhaps take some of the figures with a pinch of salt. I must say that I struggle to understand how exactly all the remaining non-doms are surviving and living here. It is all very well trumpeting the funds obtained through the non-dom charges—we heard the same again today—but for high net worth individuals claiming non-dom status, those charges might be dwarfed by the taxes they would have paid if they were treated like ordinary Brits. Furthermore, while the Financial Secretary claimed that the proposals would end permanent non-dom status, that, as many Labour Members have mentioned, is not the case for those whose parents are non-doms.

It is difficult to avoid the conclusion of firms aiding individuals to attain non-dom status, such as the Tax Advisory Partnership, that non-dom status is, in its words, “generally advantageous to taxpayers”, although not of course to British ones. The firm also notes that

“trust planning is a valuable option for many non-doms”,

yet the Government’s new measures protect income that is already locked into trusts. As my hon. Friend the Member for Ilford North said, this is big business for the many firms engaged in enabling people to avoid tax.

I am very sorry that rather than promoting investment in our country, the non-dom system seems for many just to be a mechanism for tax avoidance. Now more than ever, we really need more business investment in Britain. Several Labour Members made the case for that today. I have looked at the figures provided by the OECD: last year, the increase in investment in Britain was half the G7 average, a third of the OECD average and a sixth of the EU average. Labour Members have heard nothing in this debate to convince us that the Government’s measures presented in the resolutions will provide the investment that our country desperately needs.

Generally, we find that while the Government may talk the talk on tax avoidance, the measures they produce are frequently watered down and insipid in practice. Just as with their measures on non-doms, we find that their commitment to crack down on those enabling aggressive tax avoidance fails to include the really strong deterrents called for by experts. Indeed, the Government initially proposed such measures, but they have now been watered down.

As several Labour Members have said, the treatment in these measures of non-doms and enablers of tax avoidance contrasts with the treatment of people who have been discriminated against in employment cases or made redundant. I must say that I share the concerns of my hon. Friend the Member for Birmingham, Selly Oak (Steve McCabe) about the fact that the Financial Secretary did not mention those issues in his opening speech, and I very much hope that he will cover them in his concluding remarks. They are incredibly important for many people in Britain, particularly as we see more employment cases being brought and more people being made redundant. Take the issue of injury to feelings payments becoming taxable. I have looked at the figures and seen that we are not necessarily talking about very large awards. In 2014, the median award for injury to feelings across all categories of discrimination was £6,600. Over the three years to 2014, median awards for discrimination on the basis of sexual orientation actually diminished to just £1,000, and awards on the basis of other characteristics have generally come in at about the £6,000 mark.

I must say that I find it churlish of the Government to focus on the people who, after all, as my hon. Friend the Member for High Peak detailed, have been forced to pursue their case at many different levels, often at considerable expense to themselves and causing considerable concern to themselves and their families. When they are found genuinely to have had a case—because their age, race, religion, sexual orientation, disability or pregnancy has been used against them—they then find out at that stage that any award is taxable. We find penny pinching that is focused on discriminated-against workers and those made redundant rather than an attempt to tackle large-scale tax avoidance head-on.

Colleagues have asked many other questions, to which we have not received adequate responses. One of the most important issues, which many colleagues mentioned, is the resourcing of HMRC, particularly with new cuts on the horizon through the removal of local offices. I am concerned that we find no commitment by the Government to grasp the nettle and properly resource HMRC so that it can feasibly assess whether high net worth individuals and multinational corporations will comply with the new rules.

I remind the Financial Secretary that there are still 10,000 fewer HMRC staff than in 2010—a 16% cut, despite the Government’s professed concern about tax avoidance. In that context it is no surprise that, as the hon. Member for Aberdeen North (Kirsty Blackman) said, proposed new powers for HMRC to enter premises and inspect goods, as well as to search vehicles or vessels, have not been repeated in the resolutions despite discussion of them before the election. In this matter as in others, an ideological commitment to reducing the size of HMRC can lead to a focus on punishing smaller businesses that have transgressed minor rules, while some of the biggest players escape their liabilities. As my hon. Friend the Member for Ilford North said, the principle of proportionality is already under pressure. That could become an even bigger problem with additional cuts.

The matter is also deeply concerning in the context of Making Tax Digital. We welcome the fact that the Government have ceded to pressure and that they are climbing down on making tax digital to an accelerated timetable, but I am worried that the Financial Secretary said that electronic reporting would be extended only when it had been shown to work well. I remember similar discussions on the introduction of digital reporting for services that suddenly had to pay VAT when the system changed to operating on the basis of where the buyer rather than the seller was. The Government said then that all the arrangements would be in place; businesses would know how to pay their VAT, and there would not be concerns about testing the system—the so-called VAT MOSS system. Many Opposition colleagues will remember it as the VAT mess system, because that is what we got.

Cuts to HMRC resources are incredibly important. One Conservative Member shouted, “With digitalisation, we don’t need HMRC staff.” In some cases, we need those staff precisely to help people through the digital process. Those staff were not there for VAT mess, and I am worried that they will not be there for elements of Making Tax Digital if the Government go ahead with their plans.

Ways and Means resolutions may be technical, as the Chancellor said in his brief intervention in the discussion, but they offer an opportunity to deal with some of the fundamental problems with the British economy. Fiscal matters are incredibly important—Opposition Members accept that, and that is why so many of us have been present, intervened in the debate and posed questions. Sadly, instead of the genuine engagement that we should have had with many of our concerns, they have not been dealt with seriously. Overall, the measures imply that the very best-off people are likely to be rewarded, with little left for everyone else.

Oral Answers to Questions

Anneliese Dodds Excerpts

Tuesday 18th July 2017 Commons Chamber

[Mel Stride]

This is an important point. As the corporation tax rate has decreased to 19%—it will go down further to 17%—we have seen a 50% increase in the take, which is an amount in the order of £18 billion.

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

Most economists prioritise building business confidence and improving infrastructure and skills over cutting corporate tax rates. Is the Minister aware that lowering corporate tax rates now presents the appearance of Britain trying to undercut countries with which we need to agree a decent Brexit deal—at a time when businesses are not confident in the Government’s leadership, but are instead “aghast” and “confused” at their approach to Brexit?

[Mel Stride]

We have seen a huge increase in employment in this country to a record level, and a record drop in unemployment to the lowest level since the mid-1970s. A lot of that has been driven by business. If the hon. Lady is seriously suggesting that the recipe for increasing the confidence of business is putting up its corporation tax to 26%, she has, I am afraid, missed the point.