Tax Avoidance and Evasion

Debate between Bambos Charalambous and Vince Cable

Tuesday 14th November 2017 Commons Chamber

[Sir Vince Cable]

I think I was in political exile at that time so I cannot testify one way or the other, but I was in government when we introduced much stronger anti-corruption measures in 2011.

As far as the register is concerned, the argument that the overseas territories and Crown dependencies advanced was that they had to keep information secret because of privacy concerns, but precisely those same privacy concerns applied to the UK. Where there was a genuine concern about privacy—for example, when people were worried about being pursued by animal rights terrorists—that has been protected, so that was a transparent and weak defence. Many things that the overseas territories do are, in fact, perfectly reasonable. There is no reason why people should pay double taxation, but serious anti-avoidance activity should be pursued.

I hope that the Government will now be much more aggressive in pursuing the issue of the open register. They could give the overseas territories a deadline for the introduction of an open register. If the overseas territories do not comply, a series of sanctions could be introduced—for example, initially stopping companies registered there bidding for public contracts. Of course, the ultimate sanction is what happened in the Turks and Caicos Islands in 2009, when there was direct rule. If overseas territories egregiously avoid taxation in a way that seriously damages the UK, that is the kind of measure that should be introduced.

Much of the discussion we have had—the right hon. Member for Barking said this in her introduction—is not about individuals but about companies, because the scale of avoidance is much greater.

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

Will the right hon. Gentleman give way?

[Sir Vince Cable]

I have limited time.

We are all familiar with the way in which some of the big internet platforms avoid large amounts of taxation simply by manipulating prices and by the way they account for intellectual property liabilities. The Government’s response has, frankly, been very weak, and it is significant, in the light of the current Brexit debate, that the one institution that is seriously going after those companies is the European Commission. Margrethe Vestager’s actions in the Competition Commission are highly competent and effective, and many of us worry that, if Brexit happens, all that energy will disappear.

I have one practical suggestion—a very simple thing the Government could do—to deal with corporate tax avoidance. It is a simple regulation that would require large companies registered here to declare, first, their total UK revenues and then their total UK expenses. It would then be immediately apparent whether there was a tax liability that had not been met, and a simple levy in lieu of tax payment would bring some of those companies to book in a reasonable way.

Let me make one final point. The reason there is so much indignation about this question is not simply that tax is being avoided, but that many of our constituents are being aggressively pursued for tax avoidance at a much pettier level. At present, a big crackdown is taking place on what are called IR35 companies. These are contractors for the health service, and they are often software specialists. There is undoubtedly a certain amount of tax avoidance in relation to national insurance, but these companies are being pursued in a highly aggressive way that the Government do not use in pursuing much bigger fish. We are now being told that the VAT tax threshold could be considerably lowered in the Budget to stop tax avoidance, but that would effectively draw a large number of small companies into the tax net. It is the pettiness of such measures, contrasted with what happens on large-scale avoidance, that attracts so much ire and anger from the public.