Tax Avoidance and Evasion

Debate between James Duddridge and Baroness Hodge of Barking

Tuesday 14th November 2017 Commons Chamber

[Dame Margaret Hodge]

I want to make some progress, because a lot of people want to speak in what is a two-hour debate.

Last week, our papers were filled with scams and scandals concerning celebrities, from the self-appointed philanthropist Bono to the popular actors in “Mrs Brown’s Boys”: stories that tainted the reputation of our much-loved royal family; revelations about establishment figures in politics, such as Lord Ashcroft and Lord Sassoon; and further evidence that corporations such as Apple deliberately establish artificial financial structures that have no other purpose than to avoid tax. I want to focus, however, on the systemic issues that these stories illustrate. It is the systemic issues that we need to consider if we are to make progress.

I will start with two comments arising from what we have learnt from the Paradise papers—observations that help us to understand what is wrong with our system. Appleby, the firm of lawyers at the heart of the Paradise papers, is one of the few offshore law practices that belong to the “offshore magic circle” of service providers. Indeed, Appleby was named offshore firm of the year by “The Legal 500” in 2015. Yet the Paradise papers reveal that the firm was criticised no less than 12 times over a 10-year period in reports issued by regulators in UK tax havens: the British Virgin Islands, the Isle of Man, the Cayman Islands and Bermuda.

Appleby was criticised for its failure to comply with regulations designed to stop the funding of terrorism and prevent money laundering. The reports talked of “persistent failures and deficiencies”, “severe shortcomings” and

“a highly significant weakness in the adequacy of the organisation’s systems and controls and a deficiency in meeting its regulatory requirements.”

Further documents reveal that Appleby simply ignored these critical reports and failed to change its procedures, despite strong words from the regulatory bodies. Even the authorities on the British Virgin Islands found, after an inspection of Appleby, that the firm had

“contravened financial services legislation…the anti-money-laundering code of practice 2008 and the anti-money-laundering regulations 2008”

and had

“severe shortcomings with a majority of the legislation, with prudential standards and good practice requirements not being met.”

Our regulatory frameworks are so weak that law firms can ignore or break the law with complete impunity. It is hopeless having self-regulation, national and international codes of practice and regulatory bodies with legal powers, if in practice they fail to secure compliance and good behaviour. The lawyers clearly just did not give a damn, and nobody held them to account.

[James Duddridge (Rochford and Southend East) (Con)]

The title of this debate is “Tax Avoidance and Evasion”. I thought I understood the distinction between the two, but I feel the line is being blurred. How does the right hon. Lady understand the distinction between avoidance and evasion?

[Dame Margaret Hodge]

I agree that the line is extremely blurred. Schemes put forward as legitimate tax avoidance are frequently found to be unlawful when HMRC finally catches up with them. It is difficult to make distinctions.

Worse than that, Appleby helped to co-ordinate a well-funded and comprehensive lobby by the International Financial Centres Forum before a G8 summit that David Cameron chaired in 2013. The then Prime Minister had intended to insist that the UK’s tax havens publish public registers of beneficial ownership in their jurisdiction. Had David Cameron had his way, we might not be here today, but the IFCF lobbied fiercely to maintain secrecy. It lobbied the right hon. Member for South West Hertfordshire (Mr Gauke), the then Exchequer Secretary, it lobbied the permanent secretary at the Department for Business, Innovation and Skills, it lobbied the senior official who was then director of the UK’s G8 presidency unit, and it succeeded in weakening David Cameron’s commitment to transparency.

--- Later in debate ---

[Dame Margaret Hodge]

I am grateful to you, Mr Speaker, for allowing this debate, and to all Members who have participated, particularly those who looked beyond narrow political party interest and more at the public interest.

We cannot allow the serious issues raised by the Paradise papers today simply to become the fish and chips wrappers of tomorrow. It is our responsibility as lawmakers to do all that we can, in the UK and with our international partners, to stamp out an injustice that is both unfair and offensive. The Government can take action that will make a difference, and it simply needs a strong political will to make that happen. I urge the Government to act in next week’s Budget.

Question put and agreed to.

Resolved,

That this House has considered the systemic issues enabling tax avoidance and evasion uncovered by the Paradise Papers.

[James Duddridge (Rochford and Southend East) (Con)]

On a point of order, Mr Speaker. Have you heard from the Foreign Office of an intention for a Minister to come to the House to make a statement on what appears to be an ongoing coup in Zimbabwe?