Tax Avoidance and Evasion

Chris Stephens Excerpts

Tuesday 25th February 2020 Commons Chamber

[Steve Barclay]

First, I pay tribute to the work the right hon. Lady did, particularly through her chairmanship of the Public Accounts Committee, on a cross-party basis to bring transparency to these issues. A key driver behind measures the Government have taken in recent years has been a desire for more international transparency, which is at the forefront of many of the concerns the House has had in the past.

Thanks to UK leadership, more than 100 jurisdictions, including—[Interruption.] I will come on to that. Within the right hon. Lady’s point, and within many of her questions, which I have sat and listened to many times, was a desire for transparency, so it is germane to her point to draw the House’s attention to the UK’s leadership in securing the commitment of more than 100 jurisdictions, including Switzerland and all the Crown dependencies and overseas territories with financial centres, to automatically exchanging financial account information under the common reporting standard. HMRC now automatically receives the details of offshore financial accounts held by UK taxpayers. As I understand it, when the PAC looked at many of these issues, that information was not available to HMRC.

We have also increased the penalties and consequences for those who devise, enable or use tax avoidance schemes. I draw the House’s attention, for example, to the disclosure of tax avoidance schemes regime, the general anti-abuse rule and the system of follower notices and accelerated payments, the last of which alone has brought in over £8.7 billion[Official Report, 3 March 2020, Vol. 672, c. 6MC.]. Since 2016, HMRC has had a dedicated fraud investigation service to ensure that no taxpayer can get away with tax fraud. I am sure that service will be keen to pick up on points raised by right hon. and hon. Members in this debate.

We are also seeking to ensure that more firms get their tax right first time, because the £35 billion tax gap is not simply one of evasion; as I say, it also includes a significant amount of error. Since last April, businesses have been using the making tax digital service for VAT, which has many benefits: it helps firms to get their tax right first time; it saves businesses time and inconvenience; it cuts the cost of government; and it makes it easier to tackle fraud, error, evasion and avoidance. The impact of Making Tax Digital is forecast to deliver an additional £1.2 billion to 2023-24. Clearly, this plays an important role in reducing that £10 billion element of the £35 billion overall tax gap.

We have also strengthened HMRC with the extra £2 billion invested since 2010 to tackle tax avoidance, evasion and other forms of non-compliance.

[Chris Stephens (Glasgow South West) (SNP)]

On HMRC’s resources, can the Chief Secretary to the Treasury therefore explain why its wealthy unit currently has 961 members of staff, which is a reduction in 80 posts from its 2018 figure? That would suggest that HMRC could have more resources piled into it to tackle this issue.

[Steve Barclay]

The hon. Member picks up on a point the shadow Chancellor made in his opening remarks about the total number of staff, but the key issue is how staff are deployed and what technology we are using. I was just referring to Making Tax Digital. If tax is being filed through the Making Tax Digital platform, the number of staff that HMRC uses will change; that profile will change. We now have about 25,000 staff dedicated to tackling tax avoidance, evasion and other forms of non-compliance, and the proof of the staffing levels is reflected in the fact that we have a near record-low tax gap—far lower than for many years under the previous Labour Administration.

Since 2010, our criminal investigations have prevented the loss of more than £15 billion and resulted in more than 5,400 individuals being criminally prosecuted and convicted. In 2018-19, HMRC investigations secured nearly 650 criminal convictions for tax and duty fraud, resulting in numerous custodial sentences. HMRC has used billions of pieces of data, combined with analytics, to identify where tax is most at risk of going unpaid and to make tailored, targeted and proportionate interventions. Technology and capabilities have moved on, therefore, but, as I am sure the Financial Secretary will mention later, what continues is the dedication of staff within HMRC, who share the House’s desire to close the tax gap and ensure that people do not evade their responsibilities.

--- Later in debate ---

[Chris Stephens (Glasgow South West) (SNP)]

First, let me congratulate the hon. Member for West Bromwich East (Nicola Richards) on her maiden speech. I particularly enjoyed her contribution on West Bromwich Albion and the three trailblazers she mentioned. Cyrille Regis and others did blaze a trail for many in our society, but they obviously had to combat some racism too. One organisation that I am involved with in Parliament is the Show Racism the Red Card all-party group, and I hope that she will consider joining it. Again, I congratulate her on her maiden speech.

The importance of this debate is to show how we deal with certain issues as a society. How does a country treat its poorest and how does it treat its richest? How do we treat the vulnerable who are having their benefit payments cut? Public services are under-resourced, infant mortality rates are increasing, and life expectancy is faltering. Then, of course, there is the use of food banks and food aid provision by more than 1 million people. In contrast, there are others in society who benefit from sweetheart deals.

I intervened on the Chief Secretary to the Treasury to ask him about HMRC’s resources. In fact, I will concentrate most of my remarks on that issue and on how we tackle tax evasion and avoidance. There is absolutely no excuse whatever for HMRC’s wealthy unit—the body responsible for dealing with tax avoidance and evasion—to have had 80 posts cut in one year, from 2018 to 2019. Let me put that into perspective. There are 961 full-time equivalents in HMRC’s wealthy unit, as opposed to the 1,400 full- time equivalents who are hired by the Department for Work and Pensions to tackle social security fraud. Let us contrast the figures. Social security fraud is estimated at £1.2 billion, yet the Department has more resources to tackle that matter than HMRC’s wealthy unit has to tackle tax avoidance and evasion. The only difficulty that I have with the Opposition motion is that it underestimates the amount of tax avoidance and evasion that takes place. A report from the Tax Justice Network and the Public and Commercial Services Union estimated that the figure could be as high as £112 billion. When it comes to the actual tax gap and what is missing from the figures, what those on the Treasury Front Bench have not mentioned is the profit-shifting that is going on. Fairly high-profile, large global companies are involved in that activity.

One would think that on an issue such as chasing a large amount of unpaid money, the Government would ensure that the Department was resourced accordingly, and that over the past 10 years, more resources, not fewer, would have been pumped into HMRC. As both the shadow Chancellor and my hon. Friend the Member for Glasgow Central (Alison Thewliss) have said, the number of HMRC staff has reduced over the past 10 years from 105,000 in 2010 to 62,000 today—a loss of 40,000 jobs. A Department whose sole responsibility is to bring in revenue should tackle that issue and get some more answers from the Government.

The Government are engaged in the “Building our Future” programme. Frankly, it is a disastrous programme, which has HMRC reducing its offices from 170 to 13 regional centres with five specialist sites. Some of our towns and cities across the UK will lose their largest employer, so where was the economic impact assessment of that programme, and where was the equality impact assessment for employees with disabilities who are being asked to travel more than 100 miles to their new office?

Legislation and regulation are badly needed, but they can work only if HMRC is properly resourced. We cannot have a situation where 14 million people are in poverty. We need real answers and real solutions now. If there are staff reductions as a result of that programme and new staff cannot be attracted, that would suggest that there is, perhaps, a problem with pay and terms and conditions. If that is the case, the Government really need to address those problems. I hope that the Minister, when he sums up, will say a bit more about how HMRC is being resourced, and that if there are resources problems, he will say how we as a House can help tackle those issues.

[Several hon. Members rose—]