Finance (No. 3) Bill

Lord Swire Excerpts

Committee: 2nd sitting: House of Commons
Tuesday 20th November 2018 Commons Chamber

[Anneliese Dodds]

As always, my hon. Friend has made an important point. We are seeing the loss of many experienced staff in these offices, which is not only a problem for HMRC, but an enormous problem for local economies.

Over the past couple of months, I have visited 10 of the locations where HMRC offices have either already closed or are set to close, and I must say that there is huge concern about the implications for those local areas. They are often ones where it takes a long time to travel to other destinations and where it is impossible to travel to work to the new regional centres. As a result, we are losing much expertise within our Revenue service.

That is reflected in the statistics from surveys of HMRC staff. We see that HMRC staff morale is incredibly low, but we have no recognition of that by the Government or any understanding of the implications of that for the services that HMRC provides. Indeed, as Members have mentioned, that would become even more of a problem if HMRC had to attempt to sort out the customs and VAT chaos that would be caused by a no-deal Brexit.

Our uncertain future relations with the EU are at the root of the penultimate Opposition amendment that I will speak to, amendment 23. The amendment requires a consideration of the implications for cross-border tax information sharing of no deal and of the Government’s withdrawal Bill arrangements. The European Scrutiny Committee asked for

“the Government’s view on the value of continued UK participation in the wider system of exchange of information created by the DAC Directive”—

the directive on administrative co-operation—

“after the post-Brexit transition period ends, and how it will seek to secure the desired level of cooperation when it becomes a third country for the purposes of EU law.”

The Financial Secretary to the Treasury, who is sitting on the Front Bench again today, sent a letter in response at the end of April. On this point, however, his letter simply said that

“the Government recognises the value of the exchange of information in tackling tax avoidance and evasion and will address procedures for ongoing administrative cooperation, including the exchange of information framework set up—”

under the directive—

“within the scope of the wider EU exit negotiations.”

It is one thing recognising the value of information exchange, but it is quite another ensuring that it will continue. We really need clarity from the Government, not only about administrative co-operation but about other forms of information exchange.

For example, will the Government continue to participate in the code of conduct group, potentially with observer status? I have asked about that repeatedly, but as of yet I have received no answer. Will we participate in the pan-EU database including information about trusts, which I referred to and which is due to be created as a result of the new iteration of the anti-money laundering directive? Will we continue to share information about tax rulings, those sweetheart deals concluded between HMRC and large taxpayers, which are not available to smaller taxpayers and which in some cases have rightly caused uproar when details of their provisions have leaked out?

The hon. Member for South Suffolk (James Cartlidge) referred to the need for a level playing field. Surely that applies in spades when it comes to transparency on tax rulings, so I am very disappointed that his Government have not yet provided that transparency. It is not clear how they will share that data with the EU27 in the future.

The Conservatives’ mood music on this issue so far has been worrying. Not only has the Chancellor damaged relations with the EU27 by threatening to turn our country into a tax haven, but his party’s MEPs—[Interruption.] He has. A number of Government Members are claiming, from a sedentary position, that that never happened, but many Opposition Members will recall precisely when he made those kinds of threats. I have talked to many colleagues from different political parties in EU27 countries who viewed those comments—

[Sir Hugo Swire (East Devon) (Con)]

Will the hon. Lady give way?

[Anneliese Dodds]

I will give way when I have finished my sentence. I am so pleased that the right hon. Gentleman is so excited about participating in this debate. As I have said, I have talked to many politicians in EU27 countries who interpreted those comments—discussing a shift towards a Singapore-style model—as a threat. Of course, often when Government Members talk about a Singapore-style model, they omit to mention the huge amount of social housing, for example, in that nation, and other aspects of its business model. I suspect they have a rather different approach in mind when they talk about it.

[Sir Hugo Swire]

The hon. Lady, who speaks for the Opposition, said she can specifically say when my right hon. Friend the Chancellor made these assertions or claims. When were they made?

[Anneliese Dodds]

I would be more than happy to look up that reference and send it to the right hon. Gentleman immediately. I regret that he cannot remember his own Chancellor’s words and that he is unaware that there have ever been comments from his Government suggesting that the UK may at some point shift towards a Singapore-style model. I regret that he is unaware of the comments that have so soured our relationship with the EU27, because I know that they have caused enormous problems for us. They have presented a picture of our country as seeking to undermine and undercut tax arrangements in the rest of the EU27. For that reason, it is enormously important that those comments should be counted.

If the right hon. Gentleman believes that his Government will no longer use that threat, I will be very pleased to hear it, and I would suggest that he perhaps has conversations with those members of his Government who have advocated that point of view.

--- Later in debate ---

[Kevin Foster]

That is what we have to balance in considering this new tax, because we do not want to shut down the entrepreneurial spirit in many companies and see such provision affecting those who are looking to set out for the first time to get a business going and perhaps to do something that changes the marketplace and really makes a difference. Some of the largest tech companies literally grew out of someone’s garage 10 or 20 years ago. Twitter did not exist when I joined the Conservative party. Facebook did not exist when I first stood for a local council back in 2002. We can see the way that those companies have grown and exploded. We do not want to set up a tax that knocks back genuine entrepreneurialism, but we also have to have a debate about how we ensure that there is a level and fair basis of taxation.

Reference was made earlier to high streets. The point is that a small shop in the centre of a town is paying business rates, collecting VAT, paying its staff and paying corporation tax, and we have to get to a point at which economic activities are fairly taxed. If a large online platform is taking millions of pounds in revenue and paying next to nothing, that is when the annoyance comes and there is a sense of unfairness.

We must have a mature debate on the future of tax in the online space, where activity is much more moveable. My hon. Friend was right to allude to that. These industries can shift much more easily than those that need a physical presence to trade and reach out to customers. A digital service company could be based in New Zealand, and we could all be using its services today from this building via smartphones, tablets or a standard internet link, in a way that would have been unimaginable 30 years ago.

We have to distinguish between genuine activity—for example, paying a company in New Zealand for a website design service—and a fake transaction or transfer of profits, where no one did anything other than raise an invoice in a convenient jurisdiction, into which the money was paid, even though all the economic activity was done elsewhere, the reason being there was an opportunity to avoid a layer of taxation. In such cases, one might see structures set up that link the corporate shell in that jurisdiction to another jurisdiction that is a tax haven or a place with a very low rate of taxation. The Dutch sandwich, which I mentioned earlier, started out as a good idea to encourage tech investment and ended up as a way to reroute profits and, when combined with the so-called double Irish, as a way of strongly minimising taxation liabilities.

[Sir Hugo Swire]

My hon. Friend is making some extremely good points with which I agree, but it is not only online companies such as Amazon that we need to work out how best to tax, but others, such as offshore gambling companies, that retain huge revenues generated by doing things in this country. Is he convinced that the thinking is going on in the Treasury on a root-and-branch reform of all taxation? It seems to me we are trying to play catch-up but that the world is changing quicker than our ability to tax this changing economy.

[Kevin Foster]

I thank my right hon. Friend for his thoughtful intervention. Obviously, I cannot speak for the Treasury, as a mere Back Bencher—[Interruption.]. I appreciate the confidence that my hon. Friend the Member for Walsall North has in me, but I cannot speak for the Treasury. I do not want to say too much about gambling taxation, given that we have just debated it, but we do need to look at the situation in the round, so my right hon. Friend was right to mention it.

My right hon. Friend is a distinguished Member of the House. He has been here for I think 17 years, during which time the economy has changed remarkably. Who would have thought back then that companies such as Woolworths would have faced a challenge from online competitors? Who would have thought that every one of us would be sat in this Chamber with a device that would allow us to buy the entire contents of a department store, order virtually anything we want, and access casino-like gambling opportunities for which not that long ago we would have had to make a trip to Monaco? We now have that all in our pockets—we can literally walk out of the Chamber and do it.

I share my right hon. Friend’s concern, but the economy is moving on. As I said in response to my hon. Friend the Member for Redditch (Rachel Maclean), we must not destroy the good, and we have to be careful not to chuck out the baby with the bathwater. The Treasury will have to look at that. The nature of work is changing, too, and that raises not only challenges for employment rights, but questions of how we tax fairly, given that it will be less and less the case that there is a big employer with lots of staff who are paid regularly, to which it is easier to apply restrictions.