Finance (No. 3) Bill (First sitting)

Bambos Charalambous Excerpts

Tuesday 27th November 2018 Public Bill Committees

[Bambos Charalambous (Enfield, Southgate) (Lab)]

I have served on one other Public Bill Committee, which was on the energy price cap. We heard lots of evidence from many companies about the benefits or disbenefits of having an energy price cap. I see no difference between that Bill Committee and this one. I do not see why we should not hear evidence from experts who can advise us on what happens, as we do in other Bill Committees. It does not make sense to have one rule for one situation and a different rule for another.

[Sir Robert Syms]

We could have a general rule that every single Committee of the House should take evidence on every single mater, but the problem is that Committee sittings would then last considerably longer. They would need to be staffed up and we would have difficulty getting Members to serve on the Committees and listen to all that evidence. Ultimately, governing is about taking decisions. There has to be a balance in understanding what points of view people take. We can sit here endlessly listening to advice, but we have to make choices.

--- Later in debate ---

[Peter Dowd]

People will thank me for it—I am sure that is the case—but I exhort people to read that detail, which will give them an insight into a way forward.

The question that a review would fundamentally seek to ask is whether the section of the GAAR that I referred to but will not quote from is strong enough in providing HMRC tax officials with the basis for pursuing corporation tax avoidance. The review would also look at its relationship to the other sections of the guidance in meeting that aim.

A related matter is whether the hollowing out of HMRC has had an impact on its effectiveness in preventing avoidance and evasion, and we cannot ignore that. My constituency, as you are well aware, Ms Dorries, is home to a significant number of HMRC staff, and they have been impacted, as everywhere has, by the Government’s hollowing out of HMRC. This matter should be considered as part of the review proposed by our amendment. The effective resourcing of HMRC needs to be reviewed as well.

[Bambos Charalambous]

Does my hon. Friend agree that we need more senior HMRC inspectors to go after the corporations that are avoiding tax and that without investment in HMRC we will not be able to recoup the taxes that are necessary to fund this country’s economy?

[Peter Dowd]

My hon. Friend makes a fair point. This is not about the production of civil servants for the sake of it, just having them in a job where they do very little and are not particularly productive. Those civil servants are incredibly productive. There are various figures on the amount spent on chasing tax avoidance: if we put in £1, we might get £9 or £10 back—more according to certain studies. We need investment in the system, so my hon. Friend’s assertion is absolutely spot on. Resourcing should be considered as part of the review of corporation tax proposed in the amendment.

For too long, the Government have asked HMRC to pay the cost of a financial crisis that it had no part in, by implementing cuts in the very Department we need to support if we are to put an end to some of these avoidance gains. The impact of the Government’s austerity agenda was recognised by the National Audit Office, which published a report suggesting that the quality of services provided by HMRC to personal taxpayers collapsed in 2014-15 and in the first seven months of 2015-16. Between 2010 and 2014-15, HMRC cut personal tax staff from 28,000 to 15,000, which has almost certainly had an impact on the functioning of HMRC. The NAO analysis indicates that the quality of services deteriorated, which I do not think is a surprise to anyone. That gives a sense of the impossible pressure that HMRC is being put under and the difficulty of delivering on tax avoidance under the Government’s agenda.

Finally, amendment 11 requires

“a review of the effects of the current UK tax gap in respect of corporation tax applying globally agreed avoidance measures to multinationals with UK-domiciled subsidiaries.”

In respect of corporation tax, there has been some debate about what the tax gap in question is. I start by referring Members to HMRC’s own analysis of the tax gap, published this year. That analysis says:

“The estimated total tax gap for Corporation Tax was £3.5 billion in 2016-17 (£3.4 billion in 2015-16). This equates to 10.6% of the overall tax gap in 2016-17…The Corporation Tax gap for large businesses in 2016-17 is estimated at £1.1 billion. This represents 5.3% of total theoretical liabilities, the same as in 2015-16. There has been an upward revision to the 2015-16 estimate since the 2017 edition of ‘Measuring tax gaps’ by around £0.1 billion due to more recent data becoming available”.

There are around 170,000 mid-sized businesses in the UK, defined as the smallest businesses previously managed by the Large Business Service and the largest small and medium-sized enterprises that were reorganised into the mid-sized business directorate. Corporation tax on mid-sized businesses is about £0.1 billion higher than in 2015-16, and the corporation tax gap for small businesses is estimated at £1.6 billion for 2016-17, which is equivalent to 8.8% of total theoretical corporation tax liabilities. Those figures demonstrate the Government’s failure to apply proper enforcement measures against corporation tax avoidance: even on their own Department’s analysis, billions are slipping through the net every year. A review would be a first step towards ensuring that we applied the proper rules against multinationals with UK-domiciled subsidiaries, for example, and that those multinationals were paying their fair share.

A recent survey by ActionAid showed that eight out of 10 of British citizens want the Government to get on and deal with this issue. The Government are, in effect, upsetting 80% of the country with their inaction on this matter. Quite a significant number of people believe action has to be taken. I therefore call on the Minister to get on with it, accept our amendments and follow our proposal in dealing with tax dodgers at the corporate level once and for all.