United Kingdom Corporate and Individual Tax and Financial Transparency Bill

Charlie Elphicke Excerpts

Friday 6th September 2013 Commons Chamber

[Mr David Nuttall (Bury North) (Con)]

It is, as always, a great pleasure to follow my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg). I entirely concur with his remarks and rise to oppose the Bill. I entirely accept that the right hon. Member for Oldham West and Royton (Mr Meacher) has introduced this Bill with the very best of intentions. I am sure he wants to achieve for the people of our country the same as I want to achieve for them: improved conditions and high-quality public services. However, I am by no means convinced that the way to do that is by introducing measures such as those contained in the snappily titled United Kingdom Corporate and Individual Tax and Financial Transparency Bill.

When I first read this Bill, I did not know where to begin in expressing my thoughts as to just how bad a piece of proposed legislation it was. I do not criticise the manner in which it has been prepared and written, I hasten to say. I am sure that Richard Murphy, who prepared it, has done an excellent job, and I have read the article he wrote about it. I am sure that he, too, had only the best intentions when he put this Bill together. However, it does absolutely nothing to increase the wealth of this nation. It does nothing to help generate new industry and new services, or to promote economic growth. I am prepared to accept that the Bill is born out of intentions that were good, but I fear that it will have nothing but the opposite effect.

I was surprised and disappointed, perhaps in equal measure, that no explanatory notes accompanied the Bill—there were none in the Vote Office when I asked for them—and no assessment had been provided of its possible impact on British companies and individuals. Without an impact assessment, I can only imagine what the impact would be. I shall discuss my conclusions and imaginings in due course, but I assure the House that they were not that the Bill augured well for this country’s prosperity.

[Charlie Elphicke (Dover) (Con)]

My hon. Friend is making a detailed and thoughtful argument. Does he believe the Bill would be likely to lead to further administration for companies in this country and would increase the regulatory burdens on them?

[Mr Nuttall]

I am grateful to my hon. Friend for that intervention, which I can answer in one word—yes. I absolutely believe the Bill would increase the regulatory burden on companies. We must draw a distinction here, as my hon. Friend the Member for North East Somerset did. Large, well-resourced public companies may have the capability and capacity to deal with yet another piece of legislation, and, as has been mentioned, there may well be good grounds, particularly for financial analysts, for this information to be in the public domain. However, the Bill goes far, far wider than just the top 100 public companies—the FTSE 100 companies.

My reading of clause 2, on which I am prepared to be corrected if I am wrong, is that the next 150 companies are not necessarily public companies. Subsection (1)(b) refers to

“those 50 large companies, not being members of the FTSE 100, that have, when arithmetically combined with their UK resident related undertakings, the largest by value UK taxable profits before the offset of all tax allowances and reliefs of any sort whatsoever in a year ended 31 March”.

That does not restrict the provision’s scope to public companies, so one must conclude that private companies will be included. The same applies in respect of paragraph (c), which deals with the next 50 largest companies by their

“value of supplies in the United Kingdom, whether chargeable or exempt, for the purposes of value added tax”

and paragraph (d), which deals with

“those 50 large companies”

that have

“the largest liability to make payment of income tax and national insurance contributions”.

In other words, the greatest employers in our land are being attacked by this Bill. I cannot believe that the Bill will encourage those companies, so the answer to the question asked by my hon. Friend the Member for Dover (Charlie Elphicke) is yes, it will undoubtedly add to the burden, particularly for the banks.

[Charlie Elphicke]

I praise the right hon. Member for Oldham West and Royton (Mr Meacher) for bringing the Bill to the House as he is a sincere campaigner against tax avoidance—a concern I share. Does my hon. Friend agree, however, that a better way to tackle tax avoidance is to get rid of the loopholes by simplifying our tax system and making it easier for people to understand?

[Mr Nuttall]

My hon. Friend is absolutely right. My view—I suspect it might well be that of my hon. Friend, too—is that if the Government wish to increase the tax yield on behalf of the nation and to make it easier for individuals and companies to abide by their obligations, the way forward is to pass simpler tax legislation that we can all understand. I am sure that my hon. Friend has greater expertise in these matters than I do, but I have always found tax legislation particularly difficult to follow. I do not know the latest figures for Tolley’s tax guides, but when I was in practice in the legal profession they were substantial volumes and I suspect that they can only have grown in the past few years. Each one, on one tax alone, is a substantial doorstop.

It is no surprise that loopholes are discovered by accountants and tax advisers because the law is so complex and convoluted. There are so many different taxes, some of which overlap, that there is scope for tax loopholes to arise by accident. Governments do not set out to create tax loopholes other than those that are set out in legislation by design, they are precisely what they are called—tax loopholes.

As has been mentioned, it is often the Government’s desire to create what might be called loopholes, such as ISAs. I have been waiting to get to this point, as it gives me my second opportunity this morning to refer to ISA. This time, I do not mean the International Seabed Authority but the individual savings account. Before I looked into deep-sea mining, that was the only form of ISA I had heard of. ISAs are a form of tax avoidance set up to replace personal equity plans and were established as a means of encouraging people to save. They were set up to encourage private individuals to save in a tax-efficient manner in that they would not have to pay income tax on the income their account had earned. That could be called a tax loophole, but it is a legal tax loophole set up by the Government.

Let me return to the Bill. We must draw a distinction between tax evasion and tax avoidance. Let us be clear: tax evasion is already illegal, but almost weekly in this House I hear the two terms being confused. People say that someone has been a tax avoider, suggesting that they have acted illegally. Well, if they have, they are not a tax avoider; they are a tax evader, and they should be brought to book and prosecuted. I have no sympathy with them whatsoever. If someone has deliberately under-declared their income, I entirely agree that they should be brought to book by the Revenue and Customs, that they should be prosecuted and, in certain cases, sent to prison. Let us not beat about the bush. I am sure I am in agreement with my hon. Friend the Minister on that. I do not want to go easy on people who have deliberately avoided their obligations to society by breaching our tax legislation in such a way as to avoid paying their dues and demands under the law. That increases the burden on everyone else.

Of course, we already have measures in place to provide the mechanism for the Revenue to ferret out these people. It can open up inquiries into their tax affairs, and it frequently does. A whole industry exists around dealing with inquiries into people’s tax affairs. My accountant sent me details of an insurance policy that I could take out for that very occasion. I could pay a premium, and then if my tax affairs were investigated by the Revenue, the policy would cover my accountancy costs while the inquiry was dealt with.

However, returning to the Bill, our Government have already taken a great deal of action on tax avoidance and tax evasion. Since 2010, the Government have collected over £23 billion in extra tax by challenging the tax arrangements of large businesses. I am informed that, by tackling transfer pricing alone, the Government have collected £2 billion since 2010. It may well be that the right hon. Member for Oldham West and Royton is introducing the Bill because he thinks that those figures are not high enough. If the measures in the Bill are such a good idea, why, in the 13 years of the previous Labour Government, under Tony Blair and the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), was none of these measures introduced? If it is such a good idea now, why was it not such a good idea then? I do not know whether my hon. Friend the Minister ever went to the Treasury team at the time with this Bill and said, “Look, here is the answer to our problems.”