Finance Bill

Baroness Laing of Elderslie Excerpts

Monday 5th September 2016 Commons Chamber

[Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP)]

I beg to move, That the clause be read a Second time.

[Madam Deputy Speaker (Mrs Eleanor Laing)]

With this it will be convenient to discuss the following:

New clause 12—Report on the impact of the criminal offences relating to offshore income, assets and activities—

‘(1) The Chancellor of the Exchequer shall, within one year of the coming into force of the provisions in TMA 1970 relating to criminal offences relating to offshore income, assets and activities introduced by section 165 of this Act publish a report on the impact of the introduction of these offences.

(2) The report must include, but need not be limited to, information about—

(a) the number of persons who have been charged with offences under each of sections 106B, 106C and 106D of TMA 1970;

(b) the number of persons who have been convicted of any such offence;

(c) the average fine imposed; and

(d) the number of people upon whom a custodial sentence has been imposed for any such offence.

New clause 13—Report into the UK Tax Gap—

‘(1) The Chancellor of the Exchequer shall, within one year of the passing of this Act, prepare and publish a report, in consultation with stakeholders, on the UK Tax Gap.

(2) The report must include the following—

(a) details of the UK Tax Gap (including individual breakdowns for figures relating to tax avoidance and tax evasion) for the financial years—

(i) 2015-16;

(ii) 2014-15;

(iii) 2013-14;

(iv) 2012-13; and

(v) 2011-12;

(b) a detailed summary of the model used by HMRC for estimating the UK Tax Gap;

(c) an assessment of the efficacy of HMRC’s performance in relation dealing with the UK Tax Gap, including—

(i) a breakdown of specific HMRC departments or units dealing with investigation and enforcement matters in relation to the UK Tax Gap;

(ii) details of the numbers of staff in each of the years listed in paragraph (a) who are located within departments or units dealing with investigation and enforcement matters in relation to the UK Tax Gap;

(iii) details of the budgets allocated to departments or units dealing with investigation above; and

(iv) details of the numbers of prosecutions or the amount of tax recovered in each financial year listed in paragraph (a) as a result of the work of HMRC departments or units dealing with investigation and enforcement matters in relation to the UK Tax Gap in those financial years.

(d) a review of the impact on tax revenues of requiring non-public organisations involved in public procurement processes to—

(i) be registered in the UK for tax purposes;

(ii) have paid UK tax for a period of at least five years prior to the date the relevant contract is awarded;

(iii) publish full details of beneficial ownership for the period of five years prior to the date the relevant contract is awarded; and

(iv) provide company accounts (including those of any beneficial owners) for the period of five years prior to the date the relevant contract is awarded.

(e) a comprehensive assessment of the efficacy of the General Anti Abuse Rule in discouraging tax avoidance;

(f) an assessment of the impact on tax revenues of introducing a set of minimum standards in relation to tax transparency for all British crown dependencies and overseas territories including (but not limited to)—

(i) placing a statutory duty on British crown dependencies and overseas territories to observe a system of good governance and practice in relation to tax enforcement; and

(ii) requiring British crown dependencies and overseas territories to maintain a public register of owners, directors, major shareholders and beneficial owners;

(g) an assessment of the impact on tax revenues of establishing a public register of all trusts located within the UK, British Crown Dependencies and overseas territories, including but not limited to—

(i) details of the names of beneficiaries to such trusts;

(ii) details of the addresses of beneficiaries to such trusts;

(iii) details of assets held by such trusts;

(iv) details of any trustees registered within the UK who have transferred that main residence to non-UK jurisdictions;

(v) details of tax avoidance schemes involving trusts which are currently disclosed to the HMRC.

(3) For the purposes of this section, the “UK Tax Gap” means the difference in any financial year between the amount of tax HMRC should be entitled to collect and the tax actually collected in that financial year which derives from tax avoidance and tax evasion.

Government amendments 136 and 137.

Amendment 167, in clause 163, page 293, line 25, leave out “may” and insert ”must”.

Amendment 168, in page 293, line 41, leave out “may” and insert ”must”.

Amendment 171, in clause 165, page 295, line 9, at end insert

“and that the person had an honest belief that all of the information included was true and accurate”.

Amendment 172, in page 295, line 26, at end insert

“and that the person had an honest belief that all of the information included was true and accurate”.

Amendment 173, in page 295, line 40, at end insert

“and that the person had an honest belief that all of the information included was true and accurate”.

Amendment 145, in schedule 19, page 589, line 29, at end insert—

‘(6) The Treasury may by regulations require the group tax strategy to include a country-by-country report.

(7) In this paragraph “country-by-country report” has the meaning given by the Taxes (Base Erosion and Profit Shifting) (Country-by-Country Reporting) Regulations 2016.”

Amendment 163, in schedule 20, page 609, line 34, at end insert

“or 100% of any fee paid by Q to P in respect of enabling Q to carry out offshore tax evasion or non-compliance”.

Amendment 164, in page 609, line 40, at end insert

“or 100% of any fee paid by Q to P in respect of enabling Q to carry out offshore tax evasion or non-compliance”.

Amendment 165, in schedule 21, page 618, leave out lines 27 to 34 and insert—

[Roger Mullin]

To those with little knowledge of Scottish limited partnerships, it may seem strange that I rise in this House to move new clause 7 in my name and those of my colleagues, but, despite what the name suggests, Scottish limited partnerships have limited connection to Scotland, and none to the Scottish Parliament. They were introduced in 1907 by the Chancellor of day, Herbert Asquith; despite rumours to the contrary, I was not present at the debates at the time, but the regulation, operation and dissolution of SLPs remain the exclusive preserve of Westminster, hence our moving this new clause.

Scottish limited partnerships have their own distinct legal personality. As a result, SLPs can, for example, hold assets, borrow money and enter into contracts. However, Asquith could never have foreseen that they would become a financial vehicle abused by international criminals and tax dodgers.

Great credit must go to the journalists of The Herald newspaper, particularly David Leask, for doggedly uncovering the truth about SLPs—and isn’t it good that for once we can praise journalism of the highest order delving into important matters, rather than merely dealing in tittle-tattle? Although some users of SLPs no doubt operate appropriately and responsibly, it is claimed that up to 95% of SLPs are mere tax evasion vehicles, including for criminal assets.

While SLPs may be registered in Scotland, they are often owned by partners based in the Caribbean or other jurisdictions that ensure ownership secrecy and low, or no, tax regimes. People operating outside the UK are exploiting opaque ownership structures to hide their true ownership. As Oxfam, too, has recently pointed out, brokers in countries such as Ukraine and Belarus are specifically marketing SLPs as “Scottish zero per cent. tax firms.”

The number of SLPs is growing apace. Data from Companies House revealed by The Herald show 25,000 were in place by the autumn of 2015 and new registrations have been increasing by 40% year-on-year since 2008.

To give an example of what can happen, in 2014 allegations emerged that SLPs had been used to funnel $1 billion out of banks in the former Soviet Republic of Moldova. The use of an SLP and a bank account in an EU country allows dodgy groups, for example from the ex-Soviet Union, to move their ill-gotten gains to tax havens under the cloak of respectability.

I am aware that the Scottish Government’s Finance Secretary, Derek Mackay, has recently written to the UK Government about SLPs. He sensibly pointed out in his letter that

“it is critical that due diligence checks are able to be made when SLPs are initially registered and when there are changes in partners, and that penalties are imposed on partners where the SLP does not comply with the relevant legislation”.

He went on to point out:

“The threat of serious organised crime does not respect borders and with the significant increase in cyber crime, it is essential that we take every step open to us to reduce this threat as much as possible”.

To that end, our new clause seeks an urgent review of SLPs that would, importantly, include taking evidence from the Scottish Government, from HMRC and from interested charities. We have crafted the new clause in the hope it will attract cross-party support, and I see no reason why anyone, other than those interested in encouraging criminality and tax evasion, would wish to oppose a review of this nature. I therefore urge the Minster to accept our new clause.