Finance (No. 3) Bill (Third sitting)

Kirsty Blackman Excerpts

Thursday 29th November 2018 Public Bill Committees

The response to a similar previous Opposition amendment—the Minister has used a similar form of words this time around—was that from the Government’s point of view it is a matter of principle that those subject to specific taxes should not be put on a register. However, is not clear to me how that differs in kind from the Government’s commitment to a foreign-owned property register. Also, I gently draw the Government’s attention to the fact that we are talking about companies, not individuals. I doubt whether any arguments about privacy would apply to any extent.

[Kirsty Blackman (Aberdeen North) (SNP)]

It is a pleasure to take part in the debate with you in the Chair, Mr Howarth. It is good to take part in this interesting debate on the changes that the Government propose.

We are happy to support Labour amendments 39 and 38. If it is pushed to a vote when the time comes, we shall support new clause 4, but I make it clear that it is not our position that corporation tax should be changed in the way the Labour party suggests. However, the new clause asks for a review of the effect of the potential change and we think it is reasonable that Opposition policies, as well as the Government’s, should be scrutinised. It is, I think, fairly reasonable for us to support the review on that basis.

Our amendment 35, as the hon. Member for Oxford East said, is similar to one of the Labour amendments. Its aim is to have a review of the effect on public finances of the expected change, including in relation to the tax gap. I do not want to contradict the hon. Lady, but the Government have put out two sets of contradictory figures on the revenue implications for the Exchequer. The Government’s 29 October policy document links to the original numbers she cited. It gives a link to more information and then provides figures contradictory to those in the policy document.

The policy document does not have the £690 million figure; it predicts an increase of £700 million in 2020-21, a reduction of £300 million in 2021-22, a reduction of £15 million in 2022-23 and, crucially, a reduction of £20 million in 2023-24. The previous set of figures said that the impact would be negligible in the fourth year. Now the Government are suggesting that there will be a decrease in the amount of money coming into the Exchequer as a result of the change. Presumably, we may imagine that the reduction will continue in future years, whereas the Government previously argued that their previous figures were correct, when they predicted not much of an increase or decrease either way in future years.

I was slightly confused by the information that the Government provided, and it would be useful to have clarity about which figures are correct, and why the policy document contains one set of figures but links to a different set on the website. Possibly a change needs to be made there, as the link to more information takes people somewhere that does not give more information—it contradicts the original information provided. I found it quite difficult to wade through that. Given what I have outlined, it is even more important that our amendment should be accepted. We need clear information from the Government, and a clear idea of what revenue effects are, or are not, expected.

Another thing that was mentioned in an earlier consultation document is the expectation that it will cost HMRC £160,000 to make the changes necessary to put the new system in place. That also needs to be teased out in the information provided. The amendment would reduce the effect on public finances, and that would include any additional spend required by HMRC staff as a result of the suggested changes.

I am concerned that there is a lack of transparency about the conflict between the two sets of figures provided, and that the Government have not been particularly clear about their intentions behind the change. I understand that they feel that making the change would put everyone on a more level playing field, but surely they should do that only if they expect a change to have a positive impact. There is no point in moving people from being liable for one tax to being liable for another tax to reduce the impact on the Exchequer, if that is the only predicted change.

Perhaps the Government want the extra money in year one, because they feel that Brexit will be such a disaster that we could do with extra money in year one, and they are willing to take the hit in future years. Given the potential impact on future years, the change will not be revenue-neutral in future. If the Government think that it will be, it would be useful to know that.

Having said all that, I am not clear about the Government’s intentions behind the change; it would be good if they could explain the rationale behind what they are doing. I have looked at the explanatory notes and they do not make it much clearer. The Government may think that this system is fairer. If that is their view, it would be useful for them to explain that.

I am not sure whether we will press the amendment to a vote; that depends a lot on the Minister’s response, the information he provides and any follow-up information he commits to providing.

[Mel Stride]

I thank colleagues for their contributions. The hon. Member for Aberdeen North asked about the rationale for making this change, and whether it was simply to treat everybody equally—there is clearly a point to that, but is it sufficient to justify the change? Equality of treatment has its merits, but, as I explained in my opening remarks, there is the issue of bringing into the corporation tax regime those who hitherto have been engaged in activities that fall due to income tax rather than corporation tax. With that come all the anti-avoidance measures, including the corporate interest restriction, the hybrid mismatch regime, the carried-forward income loss restrictions and the capital gains and loss restrictions that were set out in the recent Budget. That is quite an important point.

[Kirsty Blackman]

I thank the Minister for attempting to explain. Pulling those people into all those anti-avoidance measures still results in a negative impact on the Exchequer. I contend that there may be no point in pulling them into these different measures if there is no positive benefit to be had from doing so.

[Mel Stride]

The latest OBR estimate is that the changes will raise £365 million across the forecast period, although I will come to the issue raised by the hon. Member for Oxford East about the timing of the figures. She referred to the consultation that we carried out between March and June 2017; we came back with our report on 1 December 2017. Draft legislation for the UK property income measure was published on L-day on 6 July, and the technical consultation was run until 31 August 2018. Responses were received from representative bodies from the property retail sector and accountancy firms. The measure was consulted on pretty thoroughly.

On the timing issues raised by the hon. Lady, the way in which the Office for National Statistics tax accounting treatment works means that increased corporation tax receipts are scored in the year of implementation, but the corresponding reduction in income tax receipts is scored in a subsequent year. There is a mismatch between the moneys coming in under the CT arrangements and the moneys that have been transferred into that regime, which do not go into the scorecard until a year later. That would largely explain the profile to which she referred.

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[Mel Stride]

The hon. Lady is right that HMRC will be privy to the information, but there is a difference between being privy to the information and treating with individuals and companies in terms of their tax return. Collating all that information and presenting it in the form that she envisages is a distinct activity.

I undertake to write to the hon. Member for Aberdeen North about the online number that she discovered and the numbers that were provided in the policy document. I wish I was so good that I just knew all the answers and was over the detail to that degree, but I will certainly write to her on that, and on the cost of making the changes to the system. I am happy to have a look at the £160,000 figure that she raised and see how it breaks down.

[Kirsty Blackman]

If possible, it would also be useful to know before we come back on Report whether the Government expect the revenue impact for the Exchequer to be negative in future years, beyond the four-year timescale that is predicted. That makes a difference in terms of whether it is, as the Minister says, a good measure across the four years or a really bad measure across 10 or 12 years.

[Mel Stride]

I think I am right in saying that over the longer term, in revenue terms the measure is likely to be broadly neutral. The OBR, of course, will only cast out across the scorecard period. It will not analyse the fiscal impacts beyond that, but if the hon. Lady would care to write to me with any questions on that, to the extent that I can answer them of course I will do so.

I commend the clause and the schedule to the Committee.

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[Anneliese Dodds]

I agree with my hon. Friend. When we are talking about this sector in particular, we must always bear in mind the impact not only on revenue but overall on investment and the need to ensure that high-quality infrastructure is provided. I know that that is enormously important and something that the Minister is concerned with and working on. For the reasons I have set out, we will press amendment 38 to a vote.

On new clause 4, I say in response to the hon. Member for Aberdeen North that there may be some agreement on some issues, but on corporation tax rates there is a difference to the extent that Labour feels that we need to work with other countries to prevent a race to the bottom. That is something we have already been doing. A race to the bottom is damaging, particularly when many businesses tell us that the corporation tax rates do not drive their decision to locate in the UK; they may be one of a basket of factors, but other matters, particularly sunk costs, are important. Therefore, we are happy for our proposals to come under scrutiny at every point, and we hope that in doing so we might persuade the SNP to come to our view as well.

[Kirsty Blackman]

To be totally clear—I am sure the hon. Member for Oxford East did not mean this—we do not support a race to the bottom either. Our manifesto position was that we supported no further reductions in corporation tax, which is slightly different from the Labour party position.

In the spirit of trying not to take up too much of the Committee’s time and the fact that amendments 35 and 38 are broadly similar and we have covered the ground of both amendments quite a lot during the course of the debate—although the answers we received could have been clearer—we are happy not to press amendment 35 and to support Labour party amendment 38.

Question put and agreed to.

Clause 17 accordingly ordered to stand part of the Bill.

Schedule 5

Non-UK resident companies carrying on UK property businesses etc.

Amendment proposed: 38, page 210, line 45 [Schedule 5], at end insert—

“Part 2A

Annual review of effects of this schedule

34A (1) The Chancellor of the Exchequer must undertake an annual review of the effects of the provisions of this Schedule on corporation tax receipts.

(2) The report of the review under sub-paragraph (1) must be laid before the House of Commons before—

(a) in respect of the first review, within 12 months of this Schedule coming into force, and

(b) in respect of each subsequent review, within 12 months of the date on which the report of the previous review was laid before the House of Commons.”—(Anneliese Dodds.)

This amendment requires an annual review of the revenue effects of this Schedule, in each year following the Schedule coming into force.

Question put, That the amendment be made.