Taxation: Tax Law Enforcement

Lord Newby Excerpts

Wednesday 30th October 2013 Lords Chamber

[Lord Phillips of Sudbury]

To ask Her Majesty’s Government how they will enable those who enforce the tax laws to accomplish their tasks better.

[Lord Newby (LD)]

My Lords, this Government are investing in HMRC, so that it will be collecting £10 billion a year more from its compliance activities by 2015-16 than it was at the start of this Parliament. The number of HMRC staff in compliance roles fell under the previous Government; under this Government there will be around 2,500 more staff tackling tax avoidance and evasion in 2014-15.

[Lord Phillips of Sudbury (LD)]

My Lords, at a time when decent Brits are struggling to pay their full taxes, is it not wholly counterproductive that many of our richest citizens and companies are evading and avoiding tens of billions of pounds in taxation? According to the HMRC calculation, every extra pound spent on enforcement resources yields £10 to £30. Although the statistics are encouraging, surely we should be doing yet more to avoid the citizen disenchantment that is currently brewing.

[Lord Newby]

My Lords, I absolutely agree with my noble friend. I would remind him that this Government reinvested an additional £917 million in compliance activities in the 2010 spending round. They added another £77 million in last year’s Autumn Statement. Therefore, we have a track record of providing HMRC with additional funding, should it come forward with proposals that result in additional tax yield. It is not inconceivable that HMRC might come forward with such proposals in respect of this year’s Autumn Statement.

[Lord Davies of Oldham (Lab)]

My Lords, should Ministers not be taking some initiative, irrespective of HMRC and its officials? Are Ministers aware of the level of anger in the country, and not just against the multinationals? We all recognise that that is a challenging nut to crack and needs international co-operation. Internal British companies—not least the energy companies—are able to locate their senior companies in offshore tax havens in order to avoid paying their legitimate tax. Is the Minister not aware that action is necessary from Ministers and not just from HMRC officials?

[Lord Newby]

I think the decision taken by Ministers to give an additional £1 billion for compliance activities was pretty clear. Many of the problems that we see with multinationals paying less tax than would appear appropriate are international by nature. That is why we have put a lot of resources into the OECD. We put another £400,000 into the work that it is doing following the G20 summit earlier this year. There is a determination across the international community, to a degree that has not been apparent before, that companies cannot get away with avoiding taxes. This must be dealt with internationally, and that is what we are promoting effectively.

[Lord Forsyth of Drumlean (Con)]

My Lords, does my noble friend agree that what the Treasury should be about is maximising the revenue that is taken in tax, and that the best way to achieve that is by having a lower, flatter, fairer tax system?

[Lord Newby]

My Lords, one of the things I learnt as a junior Customs and Excise official—

[Noble Lords]

Oh!

[Lord Newby]

It was a very long time ago, my Lords. While there are many good theoretical principles on which taxes need to be based, the single most important is the ability to collect the tax in the way you want. That must be a guiding principle. I do not believe that there is an easy answer to generating higher levels of tax revenue just by having a straightforward tax system. If it were as simple as that, it would have been tried by now.

[Lord Campbell-Savours (Lab)]

My Lords, what additional mechanisms, procedures and arrangements are being put in place to maximise the potentially substantial income available from the letting of residential property, particularly in London, by people overseas? At the moment that revenue is often not collected.

[Lord Newby]

My Lords, as the noble Lord will know, in last year’s Budget and Finance Bill, the stamp duty payable on high-value properties in those circumstances was significantly increased. That has led to a substantial increase in the overall yield of stamp duty on property transactions.

[Lord Tebbit (Con)]

My Lords, is my noble friend aware that a very good precedent has been set on the avoidance of tax by the immediate past Prime Minister, Mr Brown? He does not pay tax on the earnings that spring from the things he does as a former Prime Minister because he gives all those earnings to charity. Is that not an example which might be followed by other former Prime Ministers?

--- Later in debate ---

[Lord Newby]

My Lords, I think that that is way beyond my pay grade.

[Lord Foulkes of Cumnock (Lab)]

My Lords, I am not going to continue this attack on Sir John Major because it is disgraceful. With respect, the Minister has been giving us the same answer about extra staff for almost the past three years, yet we have illustration after illustration of evasion. First it was Starbucks, then it was Amazon, then it was Philip Green and Irvine Laidlaw; one after the other has been avoiding tax. Has the Minister not yet come to the conclusion that what is needed is legislation to close the tax loopholes?

[Lord Newby]

My Lords, leaving aside the fact that, sadly, I have not been a Minister for three years, the question of closing tax loopholes and dealing with companies that are international by their nature is an international problem. The level of activity now being undertaken via the OECD is on a scale that we have not seen for a generation. Some 15 work streams are currently under way, looking at different aspects of this problem, with a two-year deadline to resolve them. If it were possible to legislate in one country and deal with all these issues, not only we but the US, Germany, France and other countries that find themselves in the same boat would have done it. You cannot operate against multinationals on a domestic basis alone; it must be done internationally. That is what we are doing, and we are putting huge effort and impetus into that work.