Corporate Tax Avoidance

Debate between Ian Swales and Bob Stewart

Monday 7th January 2013 Commons Chamber

[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.