Corporate Tax Avoidance

Ian Swales Excerpts

Monday 7th January 2013 Commons Chamber

[Ian Swales (Redcar) (LD)]

I beg to move,

That this House has considered the matter of corporate tax avoidance.

First, I thank the hon. Members from all parts of the House who supported my bid for a debate, and the Backbench Business Committee for scheduling it so quickly.

In October, the Government borrowed more than predicted, and the main reason given was lower than expected corporation tax receipts. In November, former City Minister Lord Myners said:

“Corporation tax for an MNC”—

a multinational company—

“operating in the UK is close to being a voluntary payment.”

In December, Eric Schmidt, chief executive officer of Google, said that he was proud that his company had avoided $2 billion of corporate income taxes worldwide in the last year. We have a crisis—a growing crisis of our national tax system operating in an international business environment. Lurid stories of tax avoidance appear almost every week, and Private Eye magazine deserves special mention for its exposure work. Vodafone, the Ritz hotel, bookmakers, water companies, care homes, professional services companies such as Accenture and CSC, and of course American behemoths including Apple, Google, Amazon, Microsoft, Facebook and Starbucks, are just a few of the examples. ActionAid says that 98 of the FTSE 100 companies have a subsidiary in a tax haven. The Government have fuelled the frenzy by doing private finance initiative and outsourcing deals with tax avoiders. We must also consider whether we can trust our media to report all this fairly, given that most of our national newspapers and their owners are themselves engaged in some form of tax avoidance.

Of course tax avoidance is not illegal, but that is why the Government must act. We are a long way from having fiscal union in Europe. Our tax systems are a cornerstone of sovereignty; they are resolutely national and I think they will remain so for as long as any of us are MPs. So when Amazon sat in front of the Public Accounts Committee recently and fielded many questions with the response that it ran a pan-European business from Luxembourg, it was not excusing itself, but vividly illustrating the problem. The French Government are already looking to levy huge extra tax payments from the company. It is totally unacceptable for EU legislation to be used to support national tax avoidance. Arguably some of that already contravenes the abuse concept in EU law, which deals with situations where a consequence was not intended when a law was made.

I was finance director of a billion-dollar global business in the mid-’90s. What has changed since then is the scale, complexity and aggression of the avoidance schemes. For example, we would never have set up legal entities in countries where we did not trade, solely to avoid tax.

[Nick Smith (Blaenau Gwent) (Lab)]

Sir Martin Sorrell has claimed that the tax that some companies pay is a matter “of judgment”. Avoidance such as that by Amazon, which the hon. Gentleman and I heard about at the Public Accounts Committee, has disadvantaged domestic businesses, which cannot relocate to lower tax regimes and shift their profits abroad. Does he agree that British businesses deserve a level playing field?

[Ian Swales]

I thank the hon. Gentleman for that intervention. I totally agree with him. The idea that large companies see their tax payments as voluntary, or as some kind of contribution they feel like making, is completely out of order. I will discuss the competition aspects later.

[Caroline Lucas (Brighton, Pavilion) (Green)]

The hon. Gentleman is making a compelling argument about how tax avoidance has grown in recent years. By 2015, the number of staff employed by Her Majesty’s Revenue and Customs will have fallen by 40,000 since 2005. Does he agree that this apparent bid to save money is entirely counter-productive, given that if we had those members of staff at HMRC we would be much more likely to be able to crack down on avoidance?

[Ian Swales]

The hon. Lady makes a powerful point. I will say more about that later, but I agree with her that we need more resource in the whole area of enforcement.

I was talking about my experience and how we would never have set up legal entities in countries just to avoid tax. Now, News International has more than 150 companies in tax havens. Transfer pricing, management fees, royalties, patent, copyright and interest payments are all ways to move money. The moving of whole businesses and headquarters to new jurisdictions is also becoming much more common.

Let us remember that companies that are prepared to go to elaborate lengths to avoid corporation tax may seek to avoid other taxes, too. If the BBC was making wide use of tax-avoiding personal service contracts for staff, we can be sure that some private sector companies are doing so, too. At a recent Public Accounts Committee hearing, Amazon told me that it raises UK VAT and pays it to the taxman, but it is a Luxembourg company; it also claimed that it did not even know the value of its sales to the UK. Someone wrote to me after the hearing confirming that they could not get a VAT invoice for their new iPad, bought for business purposes. Amazon said that

“we are unable to provide a VAT number as we are registered overseas”.

[Bob Stewart (Beckenham) (Con)]

I thank the hon. Gentleman for giving way and appreciate the opportunity to speak on something about which I know little. If a company does not know the value of its sales in the country, I think that HMRC should estimate them, charge corporation tax on that amount, and let the company argue against it to prove that HMRC was wrong. We would then get better corporate tax returns, would we not?

[Ian Swales]

That is an interesting idea and I thank the hon. Gentleman for the suggestion. HMRC needs to look much more closely at companies that have that type of business model. I agree that we need to start making some presumptions.

[Charlie Elphicke (Dover) (Con)]

Is it not the case that for physical goods, Amazon would have to account for VAT in the UK? The issue is that for electronic goods, it accounts for VAT in Luxembourg, so Luxembourg is eating our VAT lunch.

[Ian Swales]

That could well be the case, and I shall speak about that later, too.

The person who wrote to me saying that they could not get a VAT number for the iPad they bought for business purposes was told that Amazon was unable to provide one. Had that been made clear to the buyer, they would have gone elsewhere to get a lower net price. Who knows, they might even have gone to Comet.

Amazon’s turnover in Europe is €7 billion. The gross VAT on that, even at Luxembourg’s lower rate of 15%, would be more than €1 billion. Where is it paid? That would be €2,000 a head for every man, woman and child in Luxembourg, but I would guess that is not paid at such a rate. I would also guess that Amazon’s UK order fulfilment subsidiary pays little or no VAT. I ask the Minister urgently to investigate how the business model operates.

[Stephen Williams (Bristol West) (LD)]

I happen to be reading Deloitte’s tax guide to Luxembourg in 2012, which states that the standard rate of VAT in Luxembourg is 15%, but that for printed materials and e-books it is 3%.

[Ian Swales]

My hon. Friend makes a good point. Amazon has already been found out for charging 20% when it should have been charging 3% on e-books.

Should we care about all that? Yes, we should. There is the obvious point about the loss of billions in Government revenue, leading to higher taxes on other parts of the economy or cuts in services, including the very infrastructure and services on which a tax-avoiding company and its employees might depend. Then there is the question of competition. My previous experience was in the global chemicals industry, but in the internet and franchising age, the unfair effects can hit anyone. Our high streets are now subject to global competition in burger restaurants, bookshops and coffee bars. Local bookmakers have largely disappeared rather than trying to compete with rivals operating from Gibraltar—on paper. Most retailers are competing not only with the unstoppable rise of the internet but with offshore-based giants such as Amazon and eBay. The list of national and local UK businesses that cannot compete will get longer and longer: Comet was the latest to go broke, just before Christmas, probably costing the UK taxpayer £50 million.

Companies that pile up untaxed revenue in tax havens also have enormous financial muscle to reinvest cheaply or take out any other business they want to. It was recently estimated that the world’s tax havens hold $13 trillion of cash, which is the total GDP of the USA plus Japan, or enough to buy the entire London stock market four times over. That highlights the compound effect of tax avoidance, as those companies benefit from not paying the tax to begin with and can then use that money to compete ever more aggressively.

The big accountancy firms have led the charge in devising schemes from which companies benefit. What world do they envisage? If more and more companies routinely avoid taxes, the Government will get revenue only from people stuck as employees on pay-as-you-earn, and from property taxes, business rates and ever-increasing VAT and duty from the companies that cannot find ways to avoid them. There will be a net move from tax on companies to tax on individuals, and if that trend continues, only companies with offshore tax havens will be able to compete. A nation of shopkeepers will be run out of business. There is also a threat to our political system, because we cannot expect all those who pay their taxes fully and fairly to keep on tolerating such abuses indefinitely. UK Uncut might be just the start of the protests.

I have been talking about the problem; now I want to explore ideas for action. First, having a national tax system operating in an international business world means that we need to police our financial borders just as rigorously as we police our physical borders for illegal movements of people, counterfeit goods, drugs or any other activity that we want to control. We must say that if a sale or business activity takes place in the UK it should be accounted for in the UK. The idea that an item can be manufactured in the UK, stored in the UK and shipped to a UK customer, but invoiced from Luxembourg, must be challenged.

We should then force transparency into the system. UK companies doing the right thing report their profits and taxes paid to Companies House in some detail, so the blanket taxpayer confidentiality regime in HMRC, which prevents the disclosure of tax affairs not only to Parliament and the Public Accounts Committee but to HMRC’s own non-executive directors, mainly helps the international tax avoiders. It is time for the publication of simple statistics that are mostly available anyway in Companies House, as that would force companies to justify their behaviour. Transparency and honesty with consumers are important. If companies have nothing to hide, they will have nothing to fear.

[Nigel Mills (Amber Valley) (Con)]

Does the hon. Gentleman agree that one thing we could do is require large companies to file their corporation tax returns with their accounts at Companies House? Then, from their accounts, we could all see their taxable profits and how they got them.

[Ian Swales]

I appreciate that intervention, because I know that the hon. Gentleman has great experience in this area. He goes further than I was proposing, but it is certainly a good idea.

Transparency and honesty are important. As we have seen recently with Starbucks, transparency can lead to consumer power influencing company behaviour. I hope that we will see more of that. Retail, business or government consumers who do not like the ethics or practices of a company do not have to deal with them, except perhaps in cases involving utilities.

HMRC must also be more transparent. Although it steadfastly claims that it does not do deals, Vodafone’s finance director told the City that its deal was worth £500 million a year. One lesson from that and other cases is that no high-level discussions with companies should take place without being minuted, and those minutes must be freely available to tax commissioners and the National Audit Office. The transparency must work both ways; we cannot go on operating through tinted windows.

[Mr Richard Bacon (South Norfolk) (Con)]

Does my hon. Friend not regard it as extraordinary that in the negotiations between HMRC and Goldman Sachs about some back payments that were due, no legal advisers were present and no minutes were taken?

[Ian Swales]

I thank the hon. Gentleman for that invention. As fellow members of the Public Accounts Committee, he and I have looked in detail at that case. He is right that such arrangements should not be made.

The UK should take a look at its own role and its relationship with tax havens such as the Isle of Man, the Channel Islands, the Cayman Islands, Gibraltar and so on, which the Secretary of State for Business, Innovation and Skills has described as sunny places for shady people. UK citizens deserve a full explanation from the Government of why they support those places as tax havens and what net benefit they bring to the UK.

It is also urgent that work takes place at EU level to ensure that companies cannot exploit sweetheart tax deals in countries such as the Netherlands and Luxembourg, aided by the free movement of goods, people and capital. It is time properly to enforce the 1997 EU code of conduct on business taxation. I am especially pleased to see you in the Chair, Madam Deputy Speaker, as that code was ratified under your chairmanship. It specifically highlights issues such as doing deals to give lower rates and tax incentives for activities that are isolated from the domestic economy of a given country. The OECD set up a forum on harmful tax practices at about the same time. Both initiatives highlighted the need for transparency. A race to the bottom helps nobody.

Next, the Government should consider disallowing some foreign interest payments for tax purposes. It is depressingly easy to move a chunk of capital to a low tax regime, then export all one’s profits via interest payments. Foreign interest should have to be specifically justified. When the loans were taken out, what was the purpose? Were they proportional to business need and are they now? Who is the lender? A related company deal needs particular scrutiny, especially as the capital may originally have been exported from the UK with no equivalent taxable interest coming back.

The Government should look at setting maximum royalty and management fees, and disallowing them as a deduction if they are disproportionate to profits. There should be an ability-to-pay test; such payments should not be allowed to wipe out UK profits, as we saw with Starbucks. The Government should work with international partners to disallow management fees and royalty, patent and copyright fees unless they go direct to the country where the relevant value was generated. Payments to tax havens could be automatically disallowed. When a company claims that rights have been sold to other countries, it needs to show that a full and fair price was paid. Of course, that would crystallise a big tax liability in the selling country. The United States would be especially enthusiastic about such a move, as it is one of the big losers from payments going to tax havens.

Because our tax systems are national, all movements of value across borders, including business transfers, need a price attached to them for tax purposes. The Government must also find a way to ensure that VAT is charged on all qualifying sales in the UK, whatever the country of origin. To go back to the point made by the hon. Member for Brighton, Pavilion (Caroline Lucas), we need much more specialist resource in HMRC. A department that brings in 100 times what it costs should not be treated like a normal cost centre; there must be many more invest-to-collect business cases to be made. Maximising our tax revenue is as much about enforcing the rules as about the rules themselves. In particular, a special unit is needed to look at everyone running an internet-based business selling to UK customers, starting with the biggest. It should look at where they are based, their business model and whether they abide by UK VAT and corporation tax rules. We need our rules and enforcement to be up to date with technological changes.

The tax system is way too complex; a whole industry has grown up to find creative ways to avoid tax. When will we see significant output and action from the Office of Tax Simplification? Surely we need radical ideas for cutting through the jungle of our tax system, not just the deletion of obscure, rarely used reliefs. Simplification is badly needed, yet we see even more complexity.

I talked earlier about consumer power. The UK Government are by far the biggest purchaser and grant-awarding body in this country. Is it right that Amazon can get more than £10 million of Government money for a new warehouse in Dunfermline when it is a Luxembourg-based retailer paying little corporation tax in this country, and apparently does not pay VAT on all its sales either? Is it right that Accenture, Capgemini and others win Government contracts when they are named as aggressive tax avoiders? Should HMRC itself have sold its buildings for leaseback to Mapeley, a Bermuda-based company? Is it not time that we recognised in financial assessments that most of the profits from private finance initiative and outsourcing contracts are now disappearing offshore?

[John Pugh (Southport) (LD)]

My hon. Friend is giving a list of remedies for tax avoidance schemes. Would not most of them have been caught by a general anti-avoidance rule?

[Ian Swales]

I thank my hon. Friend for the intervention. I am not familiar enough with how such a rule would be structured, but the idea would certainly be helpful.

[Caroline Lucas]

May I suggest that all Members look at the private Member’s Bill introduced by the right hon. Member for Oldham West and Royton (Mr Meacher)? The Bill refers to the importance of a general avoidance principle rather than rules. The problem with rules is that people can bend them and get round them. A general avoidance principle is much harder to get round and has much wider scope. That is the route the Government should be taking.

--- Later in debate ---

[Ian Swales]

I certainly have something to learn. I hope that the right hon. Member for Oldham West and Royton (Mr Meacher) will speak about his Bill later.

We should play the tax avoiders at their own game. If their UK accounts show virtually no profit, are they robust enough to deal with for the long term, and do they have the right ethics to work in our public sector? There is a big drive in manufacturing at the moment—the desire for “Made in Britain.” Perhaps it is time for Government procurement to work on a “Paid in Britain” basis. Small and medium-sized UK companies who are doing the right thing have a clear disadvantage when bidding against the tax-avoiding giants. I am convinced that doing public sector business with tax avoiders does net damage to our economy. Government action could mean that companies quickly change their behaviour. When I suggested such a step to Google at the PAC hearing, the signal was quickly picked up, with an article in the trade press.

The Government have enormous power to require those seeking grants or contracts to reveal the tax structure of their UK entities. When making their choice, decision makers could then include the bidder’s tax arrangements. The National Outsourcing Association supports such a move, which is surely part of getting the best value for UK taxpayers when spending their money. To those who cry “EU bidding rules,” I say that it is right to look at both costs and potential tax income. Who can stop countries demonstrably making the best value choice in the national interest from an open process?

The issue is not party political. MPs on both sides of the House want action. The problem is urgent, huge and growing. The more companies and their advisers see what others are doing, the more the leakage becomes a flood. Only a select few will be able to keep their heads above water, and it will be the smaller, independent companies who are overwhelmed. We cannot rely on pleas for morality or altruism. Companies play by the rules set in this House and the enforcement we put in place to back them up. Just last week the Prime Minister said that the issue is a top priority. Tinkering will not do. Now is the time for radical action.

--- Later in debate ---

[Mark Field (Cities of London and Westminster) (Con)]

I congratulate the hon. Member for Redcar (Ian Swales) on initiating this very important debate, although I must confess that I did not agree with everything he said. I am rather concerned by the strongly anti-business approach to this issue shown by certain Members.

I have a great deal of sympathy for the leaders of all the political parties in formulating what would be regarded as an adequate response to the hot potato of corporate tax avoidance. In today’s 24/7 media world, there is a constant demand on political figures to provide a running commentary on populist media campaigns following the high-profile cases to which the hon. Gentleman referred, including global businesses such as Google, Amazon and Starbucks.

I can fully understand the temptation to brand this as a moral issue, appealing to corporates’ consciences when the legislative framework has failed, but it is a temptation that we in politics should try to avoid. In sparking a debate on morality in relation to the payment of tax, I fear that elite politicians open up a dangerous flank, because it suggests that the Government are either impotent or are being disingenuous in their outrage. That applies to Governments of all colours. After all, Parliament must ultimately set the rules within which companies operate. As my hon. Friend the Member for South Norfolk (Mr Bacon) said, the precedent that has now been set, with Starbucks paying an amount of tax that it alone has determined sufficient publicly to salve its conscience, is a very odd one.

I am very concerned about the whole idea of mob rule. I am sorry that the right hon. Member for Birkenhead (Mr Field) is not in his place. He speaks eloquently about issues such as immigration, and he would be unwise to think that mob rule is a way of dealing with immigration problems, for example. We must recognise that we are a democracy and that this is the forum within which the rules should be made. We should not try to inspire mob rule, whether on the payment of tax or for any other purposes within our society.

I have lost count of the number of times that media commentators have remarked that they would be delighted to apply the same approach to their own tax affairs by paying what they feel like rather than what the Government demand of them. However, I have a much wider concern—that investors will begin to sense that UK policy on tax and regulation is becoming ever more arbitrary, governed more by sentiment and the news cycle than by the strict rules that should be enforced by HMRC and ultimately by the courts. The UK should be proud of its traditional place as a bastion of commercial certainty attracting investment from every corner of the globe, and, as my hon. Friend the Member for Lincoln (Karl MᶜCartney) pointed out, that will be undermined by high-profile rows such as this.

That is not to say that all is well. As we saw in my own constituency with the protest outside St Paul’s cathedral only a year or so ago, there is deep-seated concern that the rules of capitalism are being skewed. None of us should take this issue lightly, not least—dare I say it?—Conservative Members, as middle-class Tory voters often feel most strongly about it. To focus on arbitrary media campaigns or to invoke mob rule, as several Members have, is entirely the wrong way forward.

Too often, as my hon. Friend the Member for South Norfolk said, coalition Ministers have conflated the concepts of avoidance and evasion in debating taxation policy. The ideal solution is for aggressive tax avoidance schemes to be stopped in their tracks before they are marketed. That requires constant dialogue and the re-establishment of trust between HMRC and tax intermediaries. As a matter of urgency, therefore, the Treasury needs to promote a much better and more extensive pre-clearance regime to allow companies, individuals and tax advisers to road-test their proposed schemes. HMRC must start investing more time in developing and managing relationships with accountants and tax lawyers.

Meanwhile, the Treasury is committed at the time of the next Finance Bill to introducing general tax anti-avoidance provisions. It is clear that any such general power of anti-avoidance will feature some retrospective taxation. That is wrong in a free society, and it will risk further damaging our nation’s reputation as a free, open and transparent place to set up, develop and run businesses.

[Ian Swales]

I hope that the hon. Gentleman did not interpret my remarks as being anti-business. Does he not worry about the competitive situation if certain companies get away with these practices and are then competing with other companies that do not have the ability to do so?

[Mark Field]

I do. Andy Street, the managing director of John Lewis, has made that point, but it obviously applies to many of the smaller independent companies. I represent a central London seat where a lot of big businesses are based and operate. Nothing is more important than encouraging independents, whether they are restaurants, wine bars or book shops, rather than just relying on big multinationals. No one wants to see all our high streets entirely dominated by large international corporations, many of which may involve themselves in what is currently regarded as aggressive tax avoidance.

--- Later in debate ---

[Charlie Elphicke (Dover) (Con)]

It is a pleasure to speak in this debate, and I congratulate my hon. Friend the Member for Redcar (Ian Swales) on securing it. I wish to discuss an area that has not been so deeply explored this evening, although it is the area where we are not as powerless as we are in so many areas of this debate because of international obligations. I wish to focus on companies in receipt of money from taxpayers under Government contracts.

I have undertaken a study of technology companies that benefit from taxpayers’ money under Government contracts and have found that Oracle, Xerox, Dell, CSC and Symantec paid no corporation tax whatsoever last year, despite earning more than £474 million from Government contracts and having a UK turnover of £7 billion. Overall, my study of 10 technology companies in receipt of more than £1.8 billion of taxpayers’ money found that they paid just £78 million in taxes on UK earnings of just over £17.5 billion of turnover. On the basis of group profitability—we are looking at the consolidated international group here—the 10 technology companies would have made more than £3.3 billion in profits in the UK, resulting in a tax liability of £879 million. The UK tax actually paid was just £78 million, so, according to my research, the tax gap was £801 million.

We are seeing big business tax avoidance on an industrial scale. To me, it is unacceptable, unethical and irresponsible. Hard-pressed families are struggling to get by and to pay their taxes—and they do pay their taxes—so it is quite wrong that highly profitable businesses abuse our tax system. We urgently need reform. No Government contracts should be awarded to businesses that are fleecing our tax system, and the Government should examine how much UK tax companies pay when deciding who gets plum Government contracts. If taxpayers’ money and a Government contract are being awarded, we should look at the taxpayers’ money we are paying out and the tax money that we get back when we assess the value for the nation of awarding a particular contract. If, for example, a Government contract for £500 million is awarded to a computer company, it should be asked what tax it pays. If it pays zero tax in the UK, and another company is paying £40 million in tax in the UK and says that it will do the work for £520 million, the balance of best value shifts. We should consider the question holistically, rather than simply thinking about how much the contract should be let for.

[Ian Swales]

The hon. Gentleman refers to a point that I made. Does he agree that if we are asked to give a Government contract to a company that makes no profit, we should take a view about that company’s long-term future? We should play it at its own game and ask whether, if it does not make any money, it will be around for the long term.

[Charlie Elphicke]

My hon. Friend makes a powerful point, but we all know the reality. We all know that companies are using Luxembourg sandwiches and parking profits in Bermuda while claiming that they are sending them back to the States, as the IP suddenly is not in any intellectual property territories outside the United States. I find that unacceptable.

Let us take Oracle as an example. The company had a turnover of about £1.4 billion and a global operating margin of 32%, so its UK projected profits should have been about £446 million. Its declared profits in the UK, however, were basically nothing and it did not pay any tax whatsoever. I regard that with concern, because its Government contract earnings were about £42 million.

Even more concerning was the fact that a small amount of tax was paid by Microsoft, which is interesting as it has about £700 million from Government contracts and paid £19 million in the UK on a turnover of £2.35 billion. It has a global operating margin of 40%, so if we apply the consolidated operating margin to the UK we can see that its projected profits in the UK would be about £945 million. Its projected tax would have been about £246 million. I am not saying that Microsoft should not have some wriggle room for the fact that its IP was generated outside the UK, but when we award Government contracts we should take into account how much tax will be paid in the UK by the person to whom it is awarded. There are difficulties with that under European procurement rules, but we could have a box on the procurement form asking how much corporation tax and how much in PAYE the company anticipated paying in the UK in relation to that contract. That would enable us to assess best value in awarding Government contracts. We could and should consider that.

I am particularly concerned about IBM, which turns over about £4 billion in the UK but has a global operating margin of 16%, which means that its UK projected profits should have been about £642 million. Its declared profits in the UK, however, were about £327 million. Again, the tax gap is substantial and rather than the projected UK tax take of £167 million, only £41 million of tax was paid. We have a shifting and sliding in that the amount of tax we are getting is rather less than one might expect, even if we take into account the question of IP being based elsewhere and not being generated in the UK. We need to consider that more deeply and should consider the whole question of royalties paid for IP as well as licensing fees.

We should see how we can make the corporation tax system in this country flatter and much simpler by getting rid of a lot of the deductions that enable our tax system to be flouted. That would bring the rate down and give the UK a system with even lower tax than we already have.

I pay tribute to the work that the Government have done; I am merely trying to advance the argument, the discussion and the debate. We have a Chancellor who has started to take real and positive action in the OECD to start the discussion on how to change the international rules. We have a Prime Minister who is leading an international summit in Northern Ireland and making tax, including international tax, a key priority. The Government have taken tax very seriously, and rightly so. Over the past 15 years, the amount of income tax paid by the working nation has gone up by about 80% whereas the amount of tax paid by business has gone up by just 6%.

The previous Government were very keen on the whole prawn cocktail circuit; they were keen to be close to big business and to let it off the hook. It is well known that the former Prime Minister and his adviser, now the shadow Chancellor, were keen that the Revenue took a softly, softly approach to big business. I think we all feel that it has gone too far, and it is time to take international as well as domestic action and to be much firmer on big businesses that do not pay their fair share.

We have a deficit to clear. We need the revenue, so we need to be firmer, but we also need a system that has a level playing field, where there is a lower, more globally competitive rate that makes it more attractive for businesses to set up and trade in Britain whether they are domestic or foreign. The way forward is to start an honest and open debate about bringing in a flatter tax system in the UK and taking the rate of corporation tax right down, so that hopefully it will be even lower than in Ireland.

--- Later in debate ---

[Ian Swales]

In calling for the debate, I wondered what level of interest the House would show in this subject. Then, when I agreed to accept a slot on the first day back after Christmas, I feared that I might find myself sitting here alone except for the Minister and the shadow Minister. Imagine my delight, therefore, at the quality of the debate today. Great expertise has been shown by Members, who have made great speeches and interventions. The overall emotion expressed right across the House was one of concern tinged with anger. The only words of dissent involved a suggestion that the debate was in some way anti-business, but I believe that everyone will recognise that we are talking about the need for a level playing field, nationally and internationally. That is all we are asking for; we are not targeting any business or practice.

Our tax system might once have been simple and smooth, but it is now showing all the signs of having had pieces nailed on, decade after decade, until it has become unrecognisable. I hope that the Minister will have heard the pleas for simplification that echoed all around the House. Today’s debate has shown me that we have a confident and capable group of Back Benchers who are ready to scrutinise this issue and support the Government’s efforts. I welcome the efforts that the Minister summarised in his speech, and the further work that is going on. The whole House will wish him and his colleagues well, but we will be watching the speed of his progress very closely.

Question put and agreed to.

Resolved,

That this House has considered the matter of corporate tax avoidance.