Taxation: Evasion and Avoidance

Lord Davies of Oldham Excerpts

Thursday 6th June 2013 Lords Chamber

[Lord Davies of Oldham]

My Lords, I am quite sure that the House does not begrudge the noble Lord, Lord Brooke, his late intervention in the debate, if only because he is the only Conservative speaker. However, we all very much appreciated the particular point that he made about charities and I hope that the Minister will respond to it.

It is normal at this stage to congratulate the noble Lord who has secured the debate on doing so and on his introductory speech. On this occasion, I do so with exceptional enthusiasm. We heard an outstanding speech from my noble friend Lord Foulkes. As my noble friend Lord Browne indicated as the second speaker, everything that needed to be said had at least been referred to by my noble friend Lord Foulkes in his all-encompassing speech, in which he made the points that were emphasised in subsequent speeches. We have of course all found other emphases to make and develop out of the original contribution.

I want to return to the opening point. My noble friend Lord Foulkes indicated that he sought this debate because society is suffering at present from grossly irresponsible conduct by people with enormous power. That was reflected, first, in the financial sector and the collapse of revenues for the Government—something that all significant nations suffered. That is why every nation has been looking at how to boost returns to their finance departments or treasuries. One thing that has stood out in every review has been that the capacity to raise taxation, certainly against declining production and the dip in production that all countries have suffered—and this country significantly so—has meant that government revenues have been under stress. Therefore, it is not surprising that the emphasis has shifted somewhat to who is making a contribution to those revenues and to whether everything is being done to see that fairness obtains. It is clear that a great deal has been revealed about the immoral conduct of a large number of our major companies, particularly multinationals. It is immoral not to make a contribution to a society that provides all the necessary infrastructure for successful operations and yet seek to deny to that society the resources that sustain these essential services.

As my noble friend Lord Foulkes emphasised, it is ordinary people who have been paying the price of these collapses, not those who have awarded themselves huge bonuses in both the financial sector and at the top of industry. This has created such a disparity in income as to produce an unfair society in very dramatic forms over these past few years. It is essential, therefore, that we seek to recreate a fair society, and that means the Government need to act. If ordinary people are paying the price in lower wages, in lost jobs, in reduced public support for people on low income and in young people having great difficulty in obtaining a start in life with a job, it is essential that we ensure fairness in society, not only in the burdens but in the contributions. There has been a significant failure in that regard.

My noble friend Lord Browne identified one dimension of the unfairness. It is not only advanced countries that are suffering because of the gross levels of tax evasion by major companies; it has a crippling impact on underdeveloped countries such as Zambia when companies evade taxes which are vastly higher than any aid we offer to such countries.

The multinational companies have come to the fore. There has been not only a series of revelations at a parliamentary level in this country but, as the noble Baroness, Lady Kramer—the only speaker until the last intervention from the coalition Benches—emphasised, the Americans have taken a clear lead in this field. Not only is there the examination that has been going on in Congress for more than a decade, to which the noble Baroness referred, but, as is now appreciated, President Obama has been effective in taking an early lead in striking bilateral arrangements with countries to ensure the essential information flows which alone give the opportunity for people to respond effectively to the way in which big companies operate.

The Americans were greatly concerned about Apple when they discovered the extraordinary amount of taxation that was avoided by the location of its main body in Ireland. With all the advantages that it derived there, it could avoid significant taxation on its activities which raised revenue in the United States, Europe and the wider world.

The noble Baroness, Lady Kramer, also referred to Starbucks, as did a number of my noble friends. Companies want to sustain their reputation—they make their sales on the basis of how they are thought to provide services by the public—and we know the assiduous amount of effort and colossal resources that companies put in to burnishing their reputations. That is why Starbucks felt obliged to make a belated contribution. However, this is tokenism: it is not the response of a major company to the obligations it has. As my noble friend Lord Browne emphasised, given the obligations that it has, it will not do for it to make a token contribution when it has been exposed and therefore fears that there has been damage to its reputation.

We need a structure of identification and enforcement with regard to tax to ensure that these matters are dealt with fairly. My noble friend Lord Watson referred to the progress that is being made in Europe on this front and he mentioned the German example. So he should, because it was the German identification of what was going on in the Liechtenstein bank accounts of German citizens that alerted policymakers to the enormous potential loss to government revenues because of these strategies.

We have certainly got an obligation here; the Germans are concerned about Liechtenstein and the Americans are concerned about Ireland and the advantages it offers multinationals, and the United Kingdom, as we all know, has a string of Crown dependencies and tax havens. It is essential that we make progress there. Some progress is being made and we congratulate the Government on seeking more openness about their operation.

I hope this point will be accepted by the Minister. This debate is taking place a week and a half before the G8 summit. The Prime Minister will be president of the G8 when the meeting takes place. Can we be assured that an emphatic lead will be taken on these issues because it is quite clear that a great deal needs to be done? Will he seek to ensure that the G8 commits itself to securing country-by-country reporting in order to get essential information into the public arena and to make obligations on companies effective?

We need to see whether the Prime Minister will be able to extend the disclosure of tax avoidance schemes on an international scale. The Government are making some progress in the domestic scene but we want to see more breadth to this because disclosure of information is key to the issues. We certainly need to make sure that the Prime Minister is able to emphasise that Britain is taking key action with regard to the tax havens over which we have some jurisdiction. We expect, therefore, that considerable progress on these matters will be made at the G8. The Prime Minister will surely recognise that this is a unique opportunity, not least because key powers have clearly identified and expressed anxiety about these issues in recent months.

We also need action at home. We need to reform our corporate tax system, which clearly does not cope adequately with the issue at the present time. As several of my noble friends have emphasised, including my noble friend Lord Haskel, we need to ensure that Her Majesty’s Revenue has the resources to pursue people effectively. It is extraordinary that there have been cut backs even in the revenue collection department of HMRC in the years since the coalition came to power when it has been identified on all sides how cost-effective the allocation of resources are to that department in securing the taxation to which the country is entitled.

This has been an extremely illuminating debate and one to which I know the Minister will have some constructive response to make. I certainly hope he has, because I want to emphasise one point from the Opposition Benches—I am aware that this debate has been rather laden with speakers from the Opposition, with scant contributions by the Conservative Party. The noble Lord will recognise that the nation has a common interest in effective action at this time, and the Prime Minister has been vouchsafed a particularly unique opportunity, which we hope he will seize.