Tax Avoidance

Helen Goodman Excerpts

Wednesday 11th February 2015 Commons Chamber

[Helen Goodman (Bishop Auckland) (Lab)]

I am pleased to follow the hon. Member for Redcar (Ian Swales). Much of what he said, apart from the last sentence, was very sensible.

I am pleased to be called in this debate but disappointed that the debate is necessary. The recent revelations about what has been going on at HSBC are shocking. They are shocking because of the scale of the problem and because of the apparent lack of shame. Even according to the Government’s own figures, the tax gap, which shows the amount of tax avoidance, has gone up from £30 billion to £34 billion in this Parliament.

For two weeks in a row, the Prime Minister has been avoiding—some might say evading—questions about this tax problem. Last week he refused to say why he would not increase tax for hedge funds, and the very next day the Financial Times revealed that the number of big City donors to the Tories has doubled, and that they now account for a third of the Tory party’s income. Today he refused to explain about HSBC and what happened with Stephen Green. In Newcastle there are buses going around asking, “Do you know a benefit cheat?” One wonders whether there were chauffeur-driven cars at the black and white ball saying, “Do you know a tax cheat?” They might have found a few people.

We must take the international dimension seriously. Between 2006 and 2011, Google’s turnover in this country was estimated at £18 billion but it paid only £16 million of tax.

[Mark Garnier]

I hate to interrupt the hon. Lady, but does she realise that tax is paid on profit and not turnover?

[Helen Goodman]

I will come to that point.

Facebook’s turnover was £200 million, and its tax payment £0.25 million—[Interruption.] Will the hon. Gentleman just wait? What is going on at the moment? One big thing is the division by multilateral companies of different subsidiaries, and a key aspect is the payment of branding through trade marks and licences registered in low-tax domains. We all understand that marketing and advertising are legitimate business interests, and it is completely reasonable to set them against revenues in order to determine profits and decide the tax liability. That, however, is not what is going on, because brands and trade marks are registered in low-tax domains, and licences and royalties are then paid into those low-tax domains to shift money around.

[Mark Garnier]

indicated assent.

[Helen Goodman]

I am glad that the hon. Gentleman is now nodding his agreement.

That is a way of moving money from high-tax jurisdictions to low-tax jurisdictions. Now, of course, these prices are not contested; they are not the result of supply and demand, but are administered just as much as prices in the Soviet Union were administered. Sometimes they are administered at suspiciously high levels, and as far as one can tell that device has been used by Starbucks and Facebook, which is why there is a big discrepancy.

I also want to call in aid our noble Friend Lord Mandelson, who said that we must deal with this issue at an international level. At the moment we have constant competition to see who can cut corporation tax the most, and an arbitraging day-ahead market that is undermining everybody’s tax base—we have seen that with the Irish Republic, and now new freedoms must be given to Northern Ireland. The situation is simply not sustainable, but agreeing international changes to the rules of the game takes time. We in this country must take more urgent, unilateral action, and I hope we can consider the way that trade marks, royalties and licences are being abused.

These arrangements are complex, and to tackle them we need Ministers with determination, the right legal framework, and enough experienced HMRC officials. It is disappointing that Ministers have reduced the number of experienced officials in HMRC who have the expertise to follow up such matters. The Minister kept saying that he has a good record of which he is confident, but the Financial Times says that the amount of tax that will be brought to the British Exchequer from measures taken by the previous Government is 10 times the amount that he will bring in. The truth is that this Government are defending the tax loopholes. We want to address them in order to abolish the bedroom tax, which is paid by the most vulnerable and by disabled people in this country. The Government are defending the hedge funds and the City loopholes because they want the money for the Tory coffers for their attempt to buy the next general election.