Tax: Church Action for Tax Justice Reports

Lord Sikka Excerpts

Thursday 21st January 2021 Grand Committee

[Lord Sikka (Lab) [V]]

My Lords, I refer to my interests in the register. I congratulate the right reverend Prelate the Bishop of St Albans for initiating this debate. I support the reports by Church Action for Tax Justice.

Curbing tax avoidance and evasion is vital for building a just society. The Government talk about it, but have delivered far too little. HMRC has stated that, during the last decade, it failed to collect around £350 billion in taxes because of avoidance, evasion and errors. Other models of the tax gap estimate the amount to be between £58.6 billion and £122 billion a year—that is around £1 trillion over a decade.

One explanation is that the Government are too soft on the tax avoidance industry. On numerous occasions, courts have adjudged tax avoidance schemes, manufactured by big accounting firms, to be unlawful. For example, the Supreme Court, in the case of HMRC v Pendragon plc, considered a KPMG mass-marketed avoidance scheme as “an abuse of law”. Despite strong judgments, no big accounting firm has been investigated, fined or prosecuted, although they are awarded plenty of taxpayer-funded contracts. Can the Minister tell us why these firms continue to be indulged? Can she name even one instance where the Government have fined or prosecuted any big accounting firm for peddling unlawful tax avoidance schemes?

There is little transparency in tax avoidance. Company accounts are often opaque and there are no disclosures about the use of avoidance schemes to artificially reduce tax obligations, even though this harms stakeholders. For more than a century, Companies Acts have been used to redraw the boundaries between public and private information. Not so long ago, turnover, gross profit, reserves, director remuneration, audit reports, fees paid to auditors for non-audit work—and much more—were considered secret.

Despite opposition from big business, legislators sought to curb darker practices through transparency. However, this logic has not been applied to tax avoidance. Large companies should be required to file their tax returns and related documents at Companies House. The cleansing effect of public sunlight can curb some of the darker practices and empower citizens to take action and selectively boycott businesses engaged in rapacious practices. Surely the Minister is not going to oppose transparency—or is she?