Tax Avoidance and Evasion

David Morris Excerpts

Tuesday 14th November 2017 Commons Chamber

[Dame Margaret Hodge]

I completely agree with my hon. Friend’s remarks, which are very pertinent to what we will be discussing in the debate.

Paying tax is an essential part of the social contract into which we all enter as members of a community. As members of society, we agree to abide by a set of rules and regulations that make all our lives better. One of those rules is that we agree to contribute through taxation into the common pot for the common good.

[David Morris (Morecambe and Lunesdale) (Con)]

I would like to ask the right hon. Lady why her family firm, Stemcor, is famous for paying virtually no tax.

[Dame Margaret Hodge]

I am really pleased the hon. Gentleman has given me the opportunity to explain the circumstances to the House. My father and his cousins were refugees from Germany. My father was then a refugee from Egypt, so he was a double refugee. I remember as a child that he often said to me, “You will never feel safe in this country. Always have your suitcase ready.” He did keep money abroad. When we discovered that after he died, we closed those funds and put them into a charity.

The level of taxation and who pays is decided by us here in Parliament through our democratic processes. That is how we create a system that is democratic and trusted by all. When a minority choose to ignore and deliberately bypass our rules and regulations and get away with it, they undermine confidence in the fairness of the system. Some people and some Members claim that tax avoidance is okay because it is lawful. Indeed, one of the Government’s Ministers from the other place, the noble Lord Bates, said on Monday that tax avoidance

“continues to be part of the international system and we recognise and value it.”—[Official Report, House of Lords, 13 November 2017; Vol. 785, c. 1611.]

He and others are simply wrong, and they misunderstand the issues. Her Majesty’s Revenue and Customs’ own definition of tax avoidance is clear:

“Tax avoidance involves bending the rules of the tax system to gain a tax advantage that Parliament never intended. It often involves operating within the letter, but not the spirit of the law.”

Those are the words of HMRC. Even it says that tax avoidance is wrong.

--- Later in debate ---

[David Morris (Morecambe and Lunesdale) (Con)]

Thank you very much, Mr Speaker. I did not expect to be called so early.

I am a little at a loss about what we are trying to achieve here: is this about tax evasion or is it about offshore companies? The reality is that offshore companies are legal entities, and a lot of them, especially across the Commonwealth countries and the overseas territories, have been set up using HMRC guidelines. That has to be clarified here and now: is this about tax avoidance per se or is it about overseas territories having tax advantages? What is it about? Yesterday, when the debate was being granted, I was standing to the side of you, Mr Speaker, and I was absolutely of the mind that this was about overseas territories or tax evasion under certain forms of tax advantages in certain countries. The UK can do its bit, as it is doing and as this Government have done.

The Labour Government did very little for 13 years, to be quite frank. Now, it is about the perception of who pays the taxes in this country. I can give the House a basic economic argument. It is like a piggy bank. Someone earns their money and puts it in an offshore piggy bank, and they pay tax on it at source and when they take it back into this country. So there is really no tax evasion there.

I can remember the Leader of the Opposition talking about the Isle of Man Government. I have lot of time for the Isle of Man Government and they have a lot of links to my constituency. The problem I have is that the Isle of Man is the most highly regulated offshore tax haven, if we want to call it that, in the whole world.

The Isle of Man Government told me:

“Amongst other things, the Customs and Excise Agreement removes the need for customs barriers between the Isle of Man, the UK and the EU”—

even the EU is loth to draft any legislation on this matter—

“and makes the Island part of the European VAT territory. The Agreement also makes provision for the Revenue Sharing Agreement (RSA), the agreed formula by which VAT and most other indirect tax revenues are split between the UK and the Isle of Man.”

On the subject of private jets, the Isle of Man Government told me:

“Since 2011, Isle of Man Customs and Excise has raised more than 30 assessments for under-declared or over-claimed VAT against businesses in the aircraft leasing sector, protecting approximately £4.7million of VAT”

for the Exchequer. So what are we arguing about? Are we arguing about reforming tax laws or reforming tax havens? I might add that most tax havens in overseas territories have been sorted out by this House.

I shall keep it short, Mr Speaker, but I think that this debate is a grand waste of time. More to the point, it is confusing to the public.

--- Later in debate ---

[Stella Creasy (Walthamstow) (Lab/Co-op)]

May I start by joining Members on both sides of the House who have congratulated my right hon. Friend the Member for Barking (Dame Margaret Hodge) on bringing this important debate? I also congratulate all the journalists involved in this investigation.

In my short contribution, I hope I might elicit from the Minister a modicum of regret for some of his recent actions. What we need to talk about today is tax avoidance, and, if I can, I want to take on the challenge put forward by the hon. Member for Morecambe and Lunesdale (David Morris). What precisely is the issue with these offshore companies? More specifically, why would anybody hold UK property and UK entities overseas?

When we look at those questions, these papers raise two clear issues for us. First and foremost, there is the case for transparency, and I want to use the example of private finance initiative companies to show why that is a problem. Secondly, there is the case for addressing the loopholes that this evidence has highlighted for us, which the hon. Member for Amber Valley (Nigel Mills) set out.

[David Morris]

Will the hon. Lady give way?

[Stella Creasy]

I will not give way at this point, because I have only two minutes left.

Nine offshore infrastructure companies own between 50% and 100% of the equity in 335 PFI companies, which account for 45% of all projects. Twelve companies have equity in 74% of all current projects. At this point, we do not know what tax is being held overseas as a result—tax that was part of the PFI value-for-money assessment. These papers reveal how that happens. Secondly, on avoidance of capital gains tax, these papers reveal that Blackstone avoided stamp duty and capital gains tax on UK commercial property to a value of around £66 billion.

These are all choices. At the end of the day, we know that the lawyers involved are like water moving towards the sea—they will follow the easiest route. The problem here is politicians, not lawyers.