Tax Avoidance and Evasion

James Cartlidge Excerpts

Tuesday 14th November 2017 Commons Chamber

[Peter Dowd]

My hon. Friend makes an important point. Transparency is at the heart of all this. I experienced a bizarre situation last week when I was on “Newsnight” with the chairman of the Cayman Islands stock exchange. What an insouciant attitude that man had to tax avoidance. He actually said that there had not been any wrongdoing—maybe not—and called for the journalists to be jailed. That is what he did, and that is the position in which we find ourselves.

[James Cartlidge (South Suffolk) (Con)]

Will the shadow Minister give way?

[Peter Dowd]

I am going to take Mr Speaker’s suggestion and push on, because it will become an admonition otherwise. I will then take some interventions.

I hope that Members across the House will join me in condemning the irresponsible and offensive comments of the chairman of the Cayman Islands stock exchange. All of us owe a debt of gratitude to the journalists involved for their hard work and diligence. They have demonstrated the importance of a free press in holding the wealthiest and most powerful individuals and multinationals to account.

To be clear, we are talking about tax avoidance that covers activities that are within the law but work against its effective application. Most of the people involved in the cases have not broken any laws or acted in a criminal way, but that does not make tax avoidance acceptable or justifiable in the 21st century. After all, as has been identified, tax avoidance costs us all. Every pound avoided is one pound taken away from our children’s education, from our armed forces—the very people who protect us—and from the elderly and disabled. The conservative—and Conservative—figures that the Government have published on tax avoidance show that HMRC recorded from 2010-2015 that £12.8 billion was lost to the Exchequer through tax avoidance. That is unacceptable.

People have a view about what the previous Labour Government did. They think that it was much better than the Tories overall, but I am not going to go there. The question arises—[Interruption.] I refer the hon. Member for Rochford and Southend East (James Duddridge) to the Financial Times. With the greatest of respect, I am not his researcher, and I am sure he is more than capable.

[James Cartlidge]

Does the hon. Gentleman accept that if the current tax gap was at the same level that it had been on average under Labour, our deficit would be £12 billion higher?

[Peter Dowd]

My hon. Friend the Member for St Helens South and Whiston (Ms Rimmer) says, “Move on.” and I think she is absolutely right. I will reaffirm the point that was made in Labour’s tax programme document: we have to push on with this debate. It does no good for the Government to talk about the past; we want to talk about the here and now and the future.

[Peter Dowd]

I will give way to the hon. Member for South Suffolk (James Cartlidge).

[James Cartlidge]

I had not expected—[Interruption.]

[Mr Speaker]

Order. There is no obligation on the hon. Gentleman to speak if he does not want to.

[James Cartlidge]

I will ask the shadow Minister a question. The tax gap is now 6%. It averaged 8% under Labour. Does he accept that if the tax gap was 8% now, the deficit would be £12 billion bigger?

[Peter Dowd]

The hon. Gentleman can extrapolate all he wants. I could extrapolate all sorts of figures, but I am not going to get into that. We will no doubt come back to the matter in due course at the Budget.

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[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

Having listened to the hon. Member for Morecambe and Lunesdale (David Morris), I am dismayed. What we are talking about is openness and transparency about tax. The right hon. Member for Sutton Coldfield (Mr Mitchell) set the tone for this debate, along with my right hon. Friend the Member for Barking (Dame Margaret Hodge). This is an important cross-party issue, and I agree with nearly every word—in fact, every word—that the right hon. Gentleman said. Tax avoidance and evasion harms countries around the world, including developing countries. It hits taxpayers in our constituencies because the wealthiest people and large corporations find ways to reduce their tax bills or to avoid paying tax completely.

[James Cartlidge]

Will the hon. Lady give way?

[Meg Hillier]

I wish to make some progress, please.

I congratulate my right hon. Friend the Member for Barking on securing this debate, and I congratulate the International Consortium of Investigative Journalists, “Panorama” and The Guardian for shining a light on what has come out of the Panama papers. The Public Accounts Committee has been shining a light on aggressive tax avoidance for some years. I pay tribute to my right hon. Friend, my predecessor as its Chair, for the work that she led us through when I served as a member of the Committee. It is thanks to the Committee’s work under my right hon. Friend that some of the worst excesses of avoidance came to light. International action—it has to be international—has led to real change at a faster pace than we have seen under any Government for many decades, by making public more information about corporations’ tax arrangements.

We continue to pursue this issue, and with political will, we can make progress. In December last year, the Public Accounts Committee held an international tax transparency conference. We had imagined, in our own humble way, that we might get people from some European Union countries to come along; we were amazed that representatives from countries around the world came. More than 20 of them signed up to our pledge on international tax transparency, to fight for our citizens and through our Parliaments to press our Governments to be bolder and faster, as the right hon. Member for Sutton Coldfield said. There are the beginnings of some political will, but we are not moving at the right pace.

The release of these papers and this information is staggering to our constituents, who just pay their taxes and have no idea how hard the wealthiest work to avoid paying tax that would help our country, particularly in this time of austerity and pay dampening. Public country-by-country reporting for large corporations is something that the Government could do right now. My right hon. Friend the Member for Don Valley (Caroline Flint) has been a champion on that issue and managed to work with the Government to change the law. The Paradise papers show that the tax arrangements we are discussing come to light only when the information is in the public domain. We need to see fast change. The establishment of offshore trusts that then buy homes, wine and cars for the beneficiary, without tax being paid, or the paying of money into offshore trusts that then make loans to individuals that are never repaid—these things cannot be right, and although they may be legal, I doubt whether they are in some cases.

The Panama papers were released in April 2016. According to the representatives from HMRC who appeared before the Select Committee last week, 66 criminal or civil investigations are currently under way, four people have been arrested and a further six have been interviewed under caution. Even with that haul, HMRC only expects an additional tax yield from the Panama papers of £100 million. That is not to be sniffed at, but it is small fry in relation to the official tax gap. That just demonstrates the lengths to which people will go to hide their money and the importance of making sure that HMRC has the resources required to pursue this matter.

We need public country-by-country reporting to be enacted. Yes, it needs to be done internationally, but if international players will not lead the way, let the UK Government take us forward. Let us be bold and brave and make sure that we set the tone and the standard for the world. The Select Committee has urged HMRC to consider a wealth tax for wealthy individuals, as they have in Japan and Australia, to make it easier to track down where people hold their wealth and where they are paying tax.

We need continued parliamentary and public pressure, so that businesses voluntarily move towards more openness. The fair tax mark has already been taken up by 30 companies, and we hope that it will be taken up by many more. I would like to see HMRC take forward more prosecutions to set an example to those who seek to avoid tax and to make sure that people question the highly paid tax advisers they recruit, because it is no longer good enough to say, “I didn’t know what was going on; I just paid someone else to do it.” Everyone needs to take responsibility for their actions, whether they are corporations or wealthy individuals.

As I said, we need to give HMRC the resources to tackle tax avoidance and evasion. As my right hon. Friend the Member for Barking said, there is a very high return rate for every pound of taxpayers’ money invested in HMRC’s investigatory arms. It is important that the Exchequer sees that benefit and ramps up the money that is available. An arbitrary target of 100 prosecutions annually has now been set. That seems an odd figure to have plucked out of a hat. We are pressing HMRC to explain where that figure has come from out of the blue. We need to make sure that the right number of prosecutions take place, not just set an arbitrary target.

My constituents pay their taxes and they deserve better. Tax is paid for the common good, and my Committee works hard to make sure that tax money is spent by the Government efficiently, effectively and economically. We need to speed up on the measures to crack down on aggressive tax avoidance and, obviously, tax evasion. We need to move towards a world in which the impact of someone not paying their fair share of taxes is recognised as something that is plainly wrong.

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[James Cartlidge (South Suffolk) (Con)]

I will speak relatively briefly. Slightly earlier, I had the pleasure of intervening on the shadow spokesman. In fact, I had a unique pleasure in that he allowed me a second intervention; I think it is called a BOGOF.

[Mr Speaker]

There is no obligation on the hon. Gentleman to speak any further if he does not feel inclined to do so. It will be difficult, but we will probably manage without him. If he does want to speak further, he may.

[James Cartlidge]

I was referring to my earlier intervention, when there was some confusion; the point of substance I was trying to get at was the difference in the tax gap. The precise figure for the tax gap is now 6%, and it was 8% under Labour. The difference in annual terms is £11.8 billion. That is incredibly important, as the newspapers are dominated by all the coverage of the Paradise papers, and the impression that gives the public is that multinational companies are running the rule over us and getting away without paying their fair share of tax, and that we are failing to deal with that. In fact, all the statistics show significant improvement under this Government in closing the tax gap and bringing forward measures to deal with avoidance and evasion.

As my hon. Friend the Member for Amber Valley (Nigel Mills) mentioned, one important issue is property. My experience, before I came to the House, was in property, as I ran a business helping first-time buyers. One of the great grievances felt by first-time buyers is the sheer quantity of money that has come into the property market, particularly in London. That money is driving up prices and making property less accessible to local people who want to get on the ladder. We should remember that we have brought in two important measures to deal with that. Until April 2015, foreign nationals did not pay capital gains tax when they sold a property in the UK. We closed that loophole in April 2015.

[Angus Brendan MacNeil]

Is not one of the greatest problems of the housing crisis described by the hon. Gentleman the inequality in the UK, where the 100 richest individuals have the same wealth as the bottom 19 million? Indeed, globally, the 85 wealthiest people in the world have the same wealth as 3.5 billion people.

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[James Cartlidge]

I do not want to go global in my answer as I am talking about the general position in the UK property market, but it is undoubtedly true that a sense of great unfairness now pertains. Prices have risen so sharply and beyond the means even of those on relatively high incomes—let alone modest ones—particularly in London. Young professionals can be on £100,000 and still struggle to get on the ladder in significant parts of the capital. But it is not just about London. My constituency of South Suffolk and those in the counties around London know that the ripple of high prices in expensive areas comes out many miles—[Interruption.] The hon. Member for Na h-Eileanan an Iar (Angus Brendan MacNeil) is shaking his head, but many people move to my constituency because of the sheer cost of living in London.

[Stella Creasy]

The hon. Gentleman is talking about property prices. He just mentioned the Government’s decision to close the loophole whereby foreign owners of residential properties were avoiding capital gains tax. Does he regret not joining with the Opposition to close the loophole regarding commercial properties? That is having exactly the same impact on the property market.

[James Cartlidge]

It has to be said that the commercial sector is one area that has been much weaker since the Brexit vote, but the main issue of fairness from the point of view of taxpayers and first-time buyers relates to residential property. Making changes to tax is about not just tax avoidance, but about provisions such as the higher stamp duty we now levy on second-home ownership and properties purchased to rent out. The key point is that those measures have had a huge impact in supporting first-time buyers.

[Neil O’Brien (Harborough) (Con)]

My hon. Friend just asked about Labour’s plans for an offshore companies property levy. Does he agree with the Institute for Fiscal Studies that such a levy is likely to raise zero pounds?

[James Cartlidge]

I was not aware of that so I am grateful to my hon. Friend for bringing it to my attention.

The broad point—my right hon. Friend the Member for Sutton Coldfield (Mr Mitchell) mentioned this earlier—is that we should look to have cross-party agreement on this. I think that we all agree on the simple point that taxpayers want a system where all companies, particularly the biggest, pay their fair share of tax. What concerns me about stories such as the Paradise papers is that there is a huge amount of associated hyperbole, giving the impression that the system is not bringing in as much tax as it could when, in fact, that is not the case.

Quite simply, I would like a system where we reward success. We must never have a system that discourages enterprise, as we need enterprising businesses to generate the wealth that funds public services. The Government are getting the balance right. We should not get the impression from this debate and from all the leaks in the papers that the Government are failing to get a grip on the issue.