Tax Avoidance and Multinational Companies

Debate between Joan Ryan and David Gauke

Wednesday 3rd February 2016 Commons Chamber

[Mr Gauke]

The first point to make is that this is a debate on the operation of the tax law as it stands, not on how people might want it to be, and to be fair to HMRC, it can only collect the tax that is due under the law as it stands, not as how people might want it to be. On reform of this area, there is no reason why we should not debate these matters. However, with regard to a move towards taxing profits on the basis of sales—there is a perfectly respectable case for reform in that direction—I would be worried about the impact on, for example, the UK’s creative and scientific sectors. I have mentioned the video games sector, and one could also look at pharmaceuticals. There are a number of areas where the UK—businesses in our constituencies—would lose out in those circumstances, so I would be a little wary about it.

[Joan Ryan]

May I bring the Minister back to the fundamental point about transparency? It would make this debate much easier and more useful if he published the details of this deal in full so that we can be sure that we are not talking about mates’ rates and a special tax loophole for Google.

[Mr Gauke]

I will come on to transparency, but let me first return to this Government’s record on changing domestic law and leading the way in updating the international system.

This Government have led internationally on the G20 and OECD base erosion and profit-shifting project, making the international tax rules fit for the 21st century. My right hon. Friends the Prime Minister and the Chancellor of the Exchequer, in particular, took on highly prominent roles in initiating those discussions and taking them forward through the G20 and the OECD. The outcome will be to level the playing field among businesses, give tax authorities more effective tools to tackle aggressive planning, and help us better align the location of taxable profits with the location of economic activities and value creation. This is a major step forward in addressing the underlying causes of aggressive tax avoidance.

We have been at the forefront of implementing this agenda, acting swiftly to change the rules on hybrid mismatches and country-by-country reporting. Because we consider it important not to rely solely on international rules, we have also legislated domestically to introduce a world-leading measure to address the contrived shifting of profit from this country—the diverted profits tax. The diverted profits tax targets companies that divert profits from the UK, principally those with substantial activities in the UK who are trying to avoid creating a UK permanent establishment. Under our rules, those companies either declare the correct amount of profits in the UK and pay the full amount of corporation tax on them, or risk being charged a higher amount of diverted profits tax at a rate of 25%. By the end of this Parliament, the diverted profits tax will raise an extra £1.3 billion, both directly and as a result of associated behavioural changes. The tax is already having that effect, and multinationals will pay more corporation tax as a result.

Draft Small and Medium Sized Business (Credit Information) Regulations 2015 Draft Small and Medium Sized Business (Finance Platforms) Regulations 2015

Debate between Joan Ryan and David Gauke

Thursday 5th November 2015 General Committees

[Mr Gauke]

To be clear about interest rates, decisions are of course for the Bank of England’s independent Monetary Policy Committee. None the less, the policy of addressing the need to reduce our deficit, for example, helped to ensure that we did not see a premature increase in market rates, which may well have fed through into bank lending.

I do not intend to digress too much on to the policies on RBS and Lloyds over the past five and a half years, other than to restate my earlier point that RBS and Lloyds had to decide how to achieve the objectives both of ensuring that their finances were on a sound footing, and to some extent deleveraging, and of providing support to small businesses. The Government supported the meeting of both objectives. Those financial institutions found themselves in a difficult situation—I do not suggest that we detain the Committee with a lengthy discussion of why they were in that position, but none the less they were.

The implementation guide, which the hon. Member for Wolverhampton South West mentioned, has been completed by the CRAs, banks and the Treasury. It has not yet been published, but it is being used to help banks and CRAs implement the credit information policies. I believe it should be published shortly, but I cannot be more precise.

On the point about Handelsbanken and designations being based on market share, not being designated will help Handelsbanken to compete more effectively with the largest banks. It will benefit from the regulations; I do not think they will be to its disadvantage.

The definition of a finance platform is in section 7 of the Small Business, Enterprise and Employment Act 2015. As the hon. Member for Wolverhampton South West will of course appreciate, it is normal legislative drafting practice not to repeat such a definition in the regulations made under the Act; but for those studying the debate and scratching their heads, I am happy to clarify that point.

On the question of why the provision of credit data on companies is not a regulated activity, the Government legislate for activities to be regulated under the regime set out in the Financial Services and Markets Act 2000 only when there is evidence that it is required. There is no such evidence in the case of providing data on companies. Regulating the activity under the regime in question would not solve the problems I mentioned earlier, but we believe that the regulations will.

The hon. Member for Enfield North—

[Joan Ryan]

Right hon.

--- Later in debate ---

[Mr Gauke]

Apologies; the right hon. Lady raised a point about voluntary and compulsory schemes. The voluntary systems were not 100% effective, which is why we are regulating today for the sharing of data. Other voluntary schemes, such as postcode lending, have been successful and do not require a legislative option. It is a question of being pragmatic as to which voluntary arrangements are working and which are not.

I will check to see whether there are any further points I can add in answer to the questions asked by the hon. Member for Wolverhampton South West.

[Joan Ryan]

Will the Minister say a few words about how monitoring of the voluntary scheme will continue? In relation to the rationale for intervention, there were 50 responses to the consultation on the matters that the Government want to regulate, which does not sound like many when we think how many SMEs there are. Will the Minister go back to SMEs and others to discuss where lending is or is not happening under the voluntary scheme? Will he go to lenders other than the main banks, to assess their view of the information that we get from that scheme?

[Mr Gauke]

I suppose the first point to make is that SMEs understandably, and perhaps rightly, tend to be focused on their business and do not necessarily always respond to Government consultation. That might explain the numbers. All I can say to the right hon. Lady is that all such matters must be kept under review. When voluntary arrangements work, so be it, but when there is evidence that they do not, the Government are willing to take action, as we have seen.

As I said, I will deal in writing with any points that I have inadvertently failed to address in response to questions raised today. I hope that this debate has been productive, that it has provided right hon. and hon. Members with some comfort on any concerns that they have, and that the Committee will join me in supporting the regulations.

Question put and agreed to.

Resolved,

That the Committee has considered the draft Small and Medium Sized Business (Credit Information) Regulations 2015.

DRAFT SMALL AND MEDIUM SIZED BUSINESS (FINANCE PLATFORMS) REGULATIONS 2015

Resolved,

That the Committee has considered the draft Small and Medium Sized Business (Finance Platforms) Regulations 2015.—(Mr Gauke.)

Oral Answers to Questions

Debate between Joan Ryan and David Gauke

Tuesday 27th October 2015 Commons Chamber

[Mr Gauke]

My hon. Friend is absolutely right. Those working 30 hours a week on the national minimum wage will be taken out of income tax altogether and kept out of income tax. That contrasts with the position in 2010 when people earning just £6,500 were paying income tax. Those people have recently seen an increase in their marginal rate from 10% to 20%.

[Joan Ryan (Enfield North) (Lab)]

Raising the personal allowance is not a panacea; it will do nothing to address the deep levels of poverty among the working poor. Is the Minister concerned at all at recent Office for National Statistics figures showing that 6 million jobs pay less than the living wage?

[Mr Gauke]

The best way to address poverty is to ensure that we have a strong economy—jobs growing, increasing productivity, making sure that we have the business investment that we need. This Government are delivering a pro-business approach that is good for job creation, which is why there are more people in work than we have seen ever before.