Luke Graham
Main Page: Luke Graham (Conservative - Ochil and South Perthshire)
Sammy Wilson (East Antrim) (DUP)
It is a joy to follow the hon. Member for Mole Valley (Sir Paul Beresford), although I disagree with much of what he said. This is not an issue of just getting people to sit down with the right tax inspector and sort things out. Today’s debate has shown that there is a deep-rooted problem right at the heart of this issue—people who were fully aware of the kind of scheme that they had entered into, and who had an understanding that it was fully legal, suddenly finding that they were faced with huge tax bills. Many people find themselves hitting their head against the brick wall of officialdom with frustration, anger and fear. As we have discussed today, this needs to be sorted out, not at some official level, but at Government level. A ministerial decision is needed.
The economist Adam Smith, who wrote the first economics textbook, laid down what were called the canons, or principles, of taxation. In answer to the question, “What should the basis of any tax system be?” he mentioned three things: first, that there should be certainty; secondly, that there should be fairness; and thirdly, that there should be convenience. If we look at what is happening with this loan charge, we can see that all those principles of taxation—the rules of good application of tax—have been broken.
Many of the people who entered into these schemes did so because they wanted to reduce their tax bills. That is perfectly legitimate. There is a difference between tax avoidance and tax evasion. I do not think that anyone here has advocated that if people have been evading their taxes they should not be pursued. But some people were forced to enter these schemes; they could not have secured employment otherwise. In fact, at the all-party group, we received evidence that even HMRC was taking on contractors, who in turn then took on employees and insisted that they were paid by these remuneration schemes. It seems that HMRC was quite happy to employ contractors on that basis, because the scheme was deemed to be legal.
Members have covered a number of issues. Let me reiterate just some of them. First, I do not believe that this scheme and the loan charge meet the criteria of ensuring that there is certainty for taxpayers. It is retrospective. No matter how the Minister tries to wriggle on this, the case is that if tax is imposed on a loan balance today, and that loan balance has been built up over a number of years, because people thought that it was okay to repay in that way, then the tax that is being demanded is retrospective.
Luke Graham (Ochil and South Perthshire) (Con)
The hon. Gentleman makes a point about the loan charge being a current liability, which is the Government’s argument. Does he agree that our constituents need clarity about what recourse they have to those advisers who told them to go for these schemes, as well as clarity from HMRC about the options for refinancing, and what protections they have as citizens?
Sammy Wilson
The other point about the retrospective nature of this is that many people thought they had put in their tax returns and given the information. They were not told that there would be an inquiry into their tax affairs, and they believed that what they were doing was perfectly legal, and that their payments would not be subject to additional tax.
My second point is about certainty. Many of those who gave evidence said that for years they were given tax bills that did not even work. They were given bills for sums that did not coincide with what they had earned, and in some cases they were told that the figure was just an estimate. One person said that when she queried the bill, HMRC said, “That is what most other people are paying.” That is how the tax bills were worked out in some cases. There was no degree of certainty, and often the bills were not related to the years that people had worked, or to their income.
Is it fair that none of those who promoted these tax schemes have been pursued? The people being pursued are the recipients of the schemes, who in some cases were forced into them, as they would not have got employment otherwise. Their employer said, “This is the way you will get paid, and that is what you have to do.” The promoters of those schemes—many of whom are based offshore or are no longer in business—are not being pursued, and those who needed to join these schemes in order to find employment are now faced with a tax liability.
Some evidence that we received suggested that if people did not settle, they might be taxed not just on the money they received, but on the fees taken by those who have now disappeared. Is that fair? My third point was about convenience. That is why we use pay-as-you-earn, and we pay tax on a monthly basis or whatever, rather than being hit with a huge sum of money all at once.