Finance Bill

Baroness Hodge of Barking Excerpts

Tuesday 28th June 2016 Commons Chamber

[Mr Gauke]

I begin by expressing my gratitude for your dispensation, Mrs Laing. I will, of course, take interventions, and I hope it will not disconcert Members if I remain standing at the Dispatch Box while doing so. There is a great deal to cover and a large number of amendments have been tabled by Opposition Members, many of which I shall have to cover briefly. I shall try to provide as much information as I can as quickly as I can and respond to points raised in the course of the debate.

Clauses 144 to 146 make administrative changes to the general anti-abuse rule—the GAAR procedure—and introduce a new penalty for those who enter into abusive tax arrangements. Clause 144 allows Her Majesty’s Revenue and Customs to make a provisional GAAR counteraction where it believes additional tax is due but the assessment time limits are due to expire. Clause 145 is an administrative change to strengthen the GAAR’s procedural efficiency. The GAAR procedure currently requires each user of the same type of marketed tax avoidance arrangements to be referred separately to the GAAR advisory panel. This is an inefficient use of HMRC’s and the advisory panel’s resources, so clause 145 corrects this. Clause 146 introduces a new penalty of 60% for taxpayers who enter into abusive tax arrangements that are counteracted under the GAAR.

The Government have tabled 84 amendments to clauses 144 to 146, making minor changes to ensure that the legislation works as intended, but let me respond now to new clause 4 and amendment 4, which relate to the GAAR clauses I have just outlined. New clause 4 asks the Government to conduct a review of the GAAR in a year’s time. The GAAR advisory panel is already required to publish anonymised reports of the cases it considers. It is difficult to see how this new clause could provide a better insight into GAAR cases than this.

Amendment 4 proposes that a penalty of 100% is introduced for the GAAR. While under HMRC’s existing penalty rules a penalty of 70% to 100% will usually be charged in cases of fraud, it is right for the GAAR penalty to sit just below this. Under the new measure, tax avoiders can be charged penalties under the existing penalty rules and the GAAR penalty up to a maximum of 100%. As such, the amendment does little more than what we are already suggesting, and I therefore urge the House to reject it.

Clause 147 and schedule 18 introduce the new serial avoidance regime and a new threshold condition for the existing POTAS—promoters of tax avoidance schemes— regime introduced by clause 148. The new serial avoidance regime will tackle those tax avoiders who use multiple tax avoidance schemes. It will work by putting avoiders on notice when HMRC defeats a scheme they have used. If they use further schemes and HMRC defeats them, they will face serious and escalating sanctions, including a penalty starting at 20% of tax understated and reaching 60% for a third scheme defeat while under notice. Clause 148 introduces a new threshold condition for the promoters of tax avoidance schemes regime so that promoters who have promoted three schemes that have been defeated by HMRC over an eight-year period risk entering the POTAS regime.

The Government have tabled 27 amendments to clause 148 and schedule 18. The amendments to schedule 18 provide for those who try to avoid tax through companies they own or partnerships to be brought within the scope of the new regime. Amendments to clause 148 provide for POTAS to cover circumstances where tax avoidance is promoted through associated persons. The remaining amendments make minor changes to ensure the schemes work as intended.

Clause 149 introduces a new requirement for large businesses to publish their tax strategies, ensuring greater transparency about their tax approach to HMRC, shareholders and the public. Transparency promotes good tax compliance while providing a fairer, more stable and competitive environment in which to do business. The strategy published by businesses must cover the areas specified in legislation, be updated annually and remain accessible. A penalty may be chargeable if a strategy is not published or if the information contained does not meet the requirements of the legislation.

The Government are also committed to tackling cases of aggressive tax planning. Schedule 19 introduces a new special measures process which will apply sanctions to large businesses that persistently undertake aggressive tax planning or refuse to work with HMRC in a collaborative and transparent way. Taken together, clause 149 and schedule 19 will help to reduce the appetite for aggressive tax planning and improve large business tax compliance.

On the amendments tabled by the Opposition, amendments 5 to 18 would collectively introduce a requirement for directors of a business to be personally, jointly and severally liable for a penalty of £25,000 should the business fail to comply with the legislation, rising to a monthly charge of £25,000 after the initial 12 months have passed. Amendments 9, 14 and 18 also propose that the said named directors should not be reimbursed in any way and would impose further penalties.

These amendments are disproportionate and go against the principle of encouraging behavioural change across businesses. Boards take a collective responsibility for any decisions made on behalf of their businesses and their tax strategy is no exception. Ultimately, this Government believe any penalty is a business responsibility, not one to be pursued across a group of directors. In summary, these amendments would result in less clarity around any sanctions, not more, and I urge the House to reject them.

The amendment to clause 149, tabled by the right hon. Member for Don Valley (Caroline Flint), seeks to require large multinational enterprises to publish a country-by-country report on their activities within their published tax strategy. As I have set out, this Government fully share her aims of increasing transparency and clamping down on avoidance and evasion wherever it occurs. Indeed, this Government have led the way in calling at an international level for public country-by-country reports. However, I do not believe that her amendment would help to achieve the objectives that we all share. It is technically flawed, and hence would not achieve the stated transparency or pro-business objectives that we all espouse.

The right hon. Lady has said that multinational businesses such as Google would be forced to publish headline information about where they do business, the money that they make and the tax that they pay, but that is not the case. According to Government legal advice, the amendment would, in practice, place such a requirement only on UK-headquartered multinationals. Foreign-headquartered multinationals such as Google would not be caught at all, and that undermines the transparency objective of the amendment.

The amendment also risks putting UK multinationals at a competitive disadvantage by imposing a reporting requirement that does not apply to foreign competitors operating in the same market. For example, a company headquartered in the UK, whether on the mainland or in Northern Ireland, would have to file public reports, but a company headquartered in the Republic of Ireland—or, indeed, pretty well anywhere else—would not. That, I think, contradicts the level playing field objective whose importance the right hon. Lady has emphasised. At a time of increased uncertainty, we should be particularly cautious about disadvantaging UK-based businesses and imposing on them a further commitment that does not apply to their foreign competitors.

[Dame Margaret Hodge (Barking) (Lab)]

I am grateful to the Minister for giving way, especially as he is in pain. He said earlier that the amendment was “technically flawed”, but that is not the advice that my right hon. Friend has received. It seems to me that, in reality, the Government are more driven by their ideas about tax competition. Will the Minister confirm that that is the case? If it is, I suggest to him that transparency is more important for the British people in particular, and that if any global company chooses to leave the UK simply because of demands for transparency and demands that it pay fair tax, which will be a rare occurrence, it may well be that it is not the sort of company that we want to be headquartered here.

[Mr Gauke]

There are some issues of timing, but I must emphasise that the only companies that would fall within the scope of the amendment would be UK-headquartered companies. The Googles of this world would be unaffected. We believe that all this should be done on a multilateral basis, and—although my timing may be slightly unfortunate—I should point out that considerable progress has been made at European Union level. Indeed, the relevant commissioner has said that we are on the cusp of a deal and that he hopes that it will be concluded during the course of the Slovakian presidency, in the second half of this year. The UK has been leading the way in that debate, and, indeed, we have been calling for the Commission to toughen up its rules.

--- Later in debate ---

New clause 8, tabled by the SNP, proposes a review of arrangements to facilitate whistleblowing about suspected tax evasion in the banking and financial services industry. HMRC values the extensive information provided each year by the public. During the 2015-16 financial year, HMRC received over 125,000 pieces of information from the public. HMRC’s actions are subject to independent scrutiny and regular inspection from the Office of Surveillance Commissioners. I am satisfied that that gives me good assurance that its work in this area is well managed and highly effective. We therefore do not believe a review is necessary and urge Members to reject the new clause.

[Dame Margaret Hodge]

Will the Minister give way?

[Mr Gauke]

I will certainly give way. I was about to turn to new clause 9.

[Dame Margaret Hodge]

I want to make two points about the response to whistleblowing. First, as I read the clause, it would lead to a review of whistleblowing in the banking and financial services sector. During my period as the Chair of the Public Accounts Committee, we did a lot of work on the whistleblowing from Falciani on the Swiss bank accounts and on the PwC leaks in Luxembourg. What was so interesting was that the only action that the two financial institutions took was to try to pursue the whistleblowers through the courts—trying to get them indicted and jailed. That is unacceptable.

Secondly, the internal HMRC lawyer who gave us the evidence that demonstrated that a sweetheart deal had been entered into with Goldman Sachs could not, in the end, return to his job. Everything of his was rifled through from his wife’s computer to his telephone and everything else. That is not good enough. I urge the Minister to think again and to instigate a review.

[Mr Gauke]

I note what the right hon. Lady says, but I will not let her comments about sweetheart deals pass. We have discussed the matter before, and I point her in the direction of Sir Andrew Park’s review of those settlements and his conclusion that there were no sweetheart deals. This is an issue that she and I have discussed before and no doubt will discuss again, and I fear that we will not reach agreement. I note her points, but I am not persuaded by the case for new clause 8.

--- Later in debate ---

[Dame Margaret Hodge]

I am grateful for the support that amendment 1, tabled by my right hon. Friend the Member for Don Valley (Caroline Flint), has received from MPs on both sides of the Chamber and a range of charities and voluntary organisations. The way in which she prepared for the debate was excellent, and I wish I had done as well, but I was a little distracted by other issues.

New clause 9, tabled by me and other hon. Members, would require the Chancellor to publish an estimate of the impact on levels of tax avoidance and tax evasion of extending the current requirement on UK-based companies to publish information to companies incorporated in the Crown dependencies and overseas territories that have significant levels of trading activity in the UK. The purpose of the new clause is to take forward the Prime Minister’s commitment to have publicly available registers of beneficial ownership for all the Crown dependencies and overseas territories.

As others have said, it is difficult to estimate the amount held in tax havens. Some estimates have put the private financial wealth held in them at between £21 billion and £32 billion, and that money is untaxed or very lightly taxed. The French economist Zucman estimated that $7.6 trillion was held offshore last year, which is the equivalent of the US budget for two years. The OECD has estimated that tax havens may cost developing countries the equivalent of three times the global aid budget. We are talking big, big, big sums.

We saw from the Panama papers how much of the money that is held offshore is held in UK tax havens. Of the 214,000 corporate entities that were exposed in the Panama papers, more than half were registered in the British Virgin Islands. I draw Members’ attention to another interesting bit of data, which shows the role of tax havens and overseas territories. A World Bank review that looked at 213 corruption cases over 30 years, from 1980 to 2010, found that 70% of those cases involved anonymous shell entities. The UK Crown dependencies and overseas territories were second behind the US on the list of those providing the shell entities that enabled that corruption and money laundering to take place.

I welcome the action the Government have taken and the leadership they have shown on the international stage, and we could just stay where we are, but the purpose of the new clause is to urge them to go further. All these issues are being revealed, and will continue to be revealed, through leaks—we have had the Falciani leaks and the Luxembourg leaks, and we have now had the Panama leaks. I am waiting for the next set of leaks; I bet they are out there—I bet a whole bunch of journalists are working on them now—but is that the way we want to learn about how corrupt individuals and greedy corporations are hiding their money, aggressively avoiding and evading tax? Would it not be better if we did everything within our power and within our authority to open up these issues so that we could see whether people were paying their fair share of tax, based on their profits, wealth or earnings, depending on whether they were an individual or a corporation?

The Minister knows that people are really angry about this issue. It is not something that has been invented by Opposition Members. I receive huge swathes of emails and letters every time I raise the issue of tax evasion and tax avoidance. If he takes the action we are suggesting and closes down the tax havens, that will be not just popular but right. That may damage the interests of a few wealthy individuals or corporations, which I think the Minister holds in awe, but it will be in the interests of the many, many people and small companies here in the UK who loyally pay their tax without any question.

I want to take the Minister through the pledges the Prime Minister has made. I was delighted in 2013 when he pledged at Loch Erne:

“Every one of the Crown Dependencies and Overseas Territories are going to have an action plan on beneficial ownership.”

In 2013 he also told them that it was time to rip aside the “cloak of secrecy” by creating a public register of beneficial ownership. In 2014 he wrote to the overseas territories urging them to consider having public registers of beneficial ownership, saying that

“beneficial ownership and public access to a central register is key to improving the transparency of company ownership and vital to meeting the urgent challenges of illicit finance and tax evasion.”

In 2015—this is the fourth example—he went to the Caribbean and again made clear his determination that overseas territories should open up. He said:

“I say to them all today, including those in this region, if we want to break the business model of stealing money and hiding it in places where it can’t be seen: transparency is the answer.”

We all agree with that, and we urge the Government to take action. They should stop talking and start acting. They should not always hide behind international co-operation. There is stuff that we can do now and that we should proceed with urgently.

If we are to know how much tax we lose from individuals hiding their money in anonymous accounts in the overseas territories and Crown dependencies—it could well be laundered money—and how much money global companies are hiding in tax havens as part of their aggressive tax avoidance strategies, we need every country to have a register of beneficial ownership, as set out in my right hon. Friend’s amendment, and those registers have to be public. That is especially important for developing countries.

As the Minister knows, we have the power to act. I fear that the reason the Government are not using their power is that they are happy to allow this massive tax avoidance and evasion to continue. I hope the Minister will reassure me in his reply that that is not the case, but that is what it feels like.

The Government have used the powers they currently have in other areas. We could therefore use an Order in Council to instruct all the overseas territories and Crown dependencies that are under our control to issue public registers of beneficial ownership. It is easy. The Conservative Government did it in the past when they used such Orders to ensure that capital punishment was abolished in overseas territories and Crown dependencies. A previous Labour Government used absolutely the same powers to ensure that discrimination against gay men was made illegal in overseas territories and Crown dependencies. If both the main political parties have used those powers in the past, why are the Government so reluctant to use them for something that is so popularly demanded and would be so important, and where they themselves agree that transparency has to be the way forward?

Some of the overseas territories are co-operating with the Government’s endeavours. However, newspaper reports tell us that the Cayman Islands and the British Virgin Islands are ignoring requests to meet officials to discuss evasion and avoidance. I understand that the Prime Minister has not met a single overseas territory since he first made the commitment to take action on opening up these tax havens in August 2013. I also understand that the Minister asked the overseas territories with financial centres to have plans for registers of beneficial ownership by 2014, but he was ignored, and he is still doing nothing.

I have here a table prepared by Transparency International that shows the current commitments on beneficial ownership by overseas territories and Crown dependencies. As the Minister knows, it shows that Turks and Caicos has done nothing, the BVI has done nothing, and the Cayman Islands is half co-operating, while Bermuda and others are refusing to have a public central register. The only country in our control that is having a public central register is ourselves. I congratulate the Minister on that—we are setting an example—but let us use our powers to go further.

What we hear and read from the two most important overseas territories—the British Virgin Islands and the Cayman Islands—is a matter of great concern. The British Virgin Islands did not come to the anti-corruption summit; it is against the proposal. Its Premier and Minister of Finance, Orlando Smith, has said:

“The moment we begin housing vast amounts of highly sensitive, private business information and then providing access to that information to a wide array of actors, the risk of a breach goes up immeasurably.

If legitimate businesses fear that their international transactions will be exposed to the world, or, worse yet, accessed by criminals or terrorists”—

I am not sure how that will happen—

“and used as a weapon of extortion or intimidation—then the gears of international finance will start to grind.”

Talking about terrorists and criminals is purely an excuse. The British Virgin Islands simply does not want to open up the books. It does not want us to know what are the beneficial ownerships of companies that have registered there or individuals who hold their money there.

After the Prime Minister said that he had made such wonderful progress in ensuring registers of beneficial ownership that would help us to find out who owned what, where, Premier McLaughlin of the Cayman Islands said:

“This is what we wanted, this is what we have been pushing for three years, for a disaggregated system which leaves the beneficial ownership information intact with the service providers.”

He got away with what he wanted. He was not forced by us to reveal the data that we so desperately need to find out what is hidden there. He went on to say:

“People don’t do business with us because we are nice”.

That is simply not good enough.

I urge the Minister to take this little new clause really seriously. I will request a Division on it. I urge him to do what he says he wants to do and open up to public account the tax havens that we, the United Kingdom, control.

Anti-corruption Summit

Baroness Hodge of Barking Excerpts

Tuesday 3rd May 2016 Westminster Hall

[Dame Margaret Hodge (Barking) (Lab)]

I congratulate the hon. Member for Amber Valley (Nigel Mills) and my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) on securing today’s debate.

I welcome the Government’s commitment to tackling corruption and the leadership shown by the Prime Minister, but for this to end up as more than a public relations stunt, the Government need to take serious action. I want to focus on three issues: tax havens and the proposals on beneficial ownership registers; properties that are owned in the UK through shell companies that have been established in tax havens; and Britain’s own record in stamping out corruption at home.

First, on tax havens, transparency about who owns assets—whether in companies, trusts or other entities—is absolutely vital if we are serious about stamping out corruption. Most tax havens are UK Crown dependencies and overseas territories, which are countries that carry the Union Jack on their flags and whose citizens are given British passports. Yet the secrecy that surrounds tax havens, which is at the heart of how they operate, results in massive corruption and money laundering throughout the world. I agree with what the Prime Minister said during his recent trip to the Caribbean in the autumn of 2015 that

“if we want to break the business model of…stealing money and hiding it in places where it can’t be seen: transparency is the answer.”

I have looked at a whole range of data, research and evidence. The World Bank review, to which the hon. Member for Amber Valley referred, looked at 213 cases of corruption over a 30-year period, from 1980 to 2010: 70% of the cases relied on anonymous shell entities, and the UK, the Crown dependencies and the overseas territories were second on that list. In the Mossack Fonseca papers, we find that of the 214,000 corporate identities exposed, half were registered in the British Virgin Islands. Of the world’s top 200 global companies, 90% have a presence in the tax havens. Tax havens are being used to hide money and to enable money laundering and corruption, yet the Prime Minister has failed to secure what I thought he was setting out to do: to ensure that the Crown dependencies and the overseas territories have registers of beneficial ownership that are open to the public. The commitment that he gave when he came to the House to give a statement arising out of his own position on the Mossack Fonseca papers failed to give us that assurance.

We only have to look at the words of one of the leaders of the overseas territories, the Premier of the Cayman Islands, to see that they saw the Prime Minister’s statement as a victory. Premier McLaughlin said that the UK had caved in:

“As previously indicated this is not a central registry as beneficial ownership details will remain with the service providers managing them, but rather information will be accessed via a central technical platform. And it certainly will not be available publically or available directly by any UK or non-Cayman Islands agency.”

I am sure that the Minister is familiar with these words. The Premier went on to say:

“This is what we wanted, this is what we have been pushing for three years for, a disaggregated system which leaves the beneficial ownership information intact with the service providers but accessible by the general registry and accessible by the law enforcement agents in Cayman.”

This is what they wanted. Indeed, what is almost worse is that in that interview, which was published in the Cayman press on the day following the Prime Minister’s announcement here in the House of Commons, the Premier said that having reached the agreement gave the Cayman Islands a greater sense of confidence about the UK’s endorsement of the business that is transacted there.

By agreeing to what is not really a register but a secret gathering of information, we have ended up giving a veil of legitimacy to the bad practices in overseas territories that allow money laundering and corruption. I say to the Minister that that is simply unacceptable. It is vital that such registers are properly compiled and public. Only then will we know who owns the assets that are at present in companies in the tax havens. Practically, until we know that, any idea that the odd collection of information in the tax havens will benefit us is false. Our own enforcement agencies are far too poorly resourced to be able to come up with evidence to justify why a tax haven should tell them who owns a company, and there will be unequal access to the data required to tackle corruption, because developing countries have even fewer resources and are less capable of seeing whether they can access such information.

I say to the Minister that it is perfectly possible for us to insist that the overseas territories and Crown dependencies compile public registers of beneficial ownership. We have intervened on other issues, and if we are serious about tackling corruption, we should intervene on this issue. In a previous time, the Conservatives intervened through an Order in Council to ban capital punishment, and Labour, when it was in office, intervened through an Order in Council to outlaw discrimination on the grounds of sexuality. The UK public will believe that the Government mean what they say about tackling corruption only if they choose to use the powers available to them through the Privy Council to enforce transparency. The first issue I ask the Minister to comment on is whether he will do that—and if not, why not?

The second issue is the scandal at our own doorstep of the way money is laundered into the UK property market. Again, the data and research here are substantial. In a 2015 paper, Transparency International found that £180 million of property that is thought to have been bought with laundered money since 2004 is currently being investigated. It claims that that is the tip of the iceberg and, to go back to the first point, says that in three out of four of those cases, an offshore structure was used to hide the owner’s identity.

Transparency International also found in March 2015 that more than 40,000 properties in London alone were held by foreign companies and that 89% of them were held in secret tax havens such as the British Virgin Islands, Jersey, the Isle of Man and Guernsey. In 2014 the Evening Standard found 700 “ghost mansions” as it called them, worth about £3 billion, uninhabited in London. The Guardian looked at one street in Hampstead and found £350 million of vacant properties all owned by shell companies in tax havens and the brilliant investigations carried out by both Private Eye and Tax Justice Network found not only massive properties held in tax havens but that 120 former Crown Estate properties had ended up being owned in 14 tax havens. They established that one in six homes sold in Westminster and in Kensington and Chelsea in the three years before their 2015 report had been bought by offshore companies.

That is a scandal, which hikes up property prices here in London and distorts the housing market. Because that is at the top of the market, I am not sure whether that is taking away from many people in real housing need, but we therefore become the centre and focus of money laundering and bringing money into the London property market through shell companies in tax havens. The Minister and the Government are consulting on this issue, but we should insist on a publicly open register of ownership of all properties in London.

In the Minister’s proposals, he talks about potential fines and imprisonment provisions for those who do not provide information, but of course that is no good if the owner is sitting in the Cayman Islands or the British Virgin Islands. He therefore needs powers to confiscate property and bring it back on to the British housing market. That would be a much stronger power. In those proposals, is the Minister talking about properties acquired in the future? If so, what does he intend to do about the many current properties?

My third and final point is about our seriousness in fighting corruption, which must start with fighting corruption at home. It is interesting—I am sure the Minister noticed this—that the first three prosecutions brought under the Bribery Act 2010 were all against UK officials: one in the courts; one a taxi driver bribing a local government official to get a licence; and one an overseas student bribing a lecturer. Whenever I talk to people in other countries, I always feel nervous about the patronising, complacent attitude we show that we have got it all right at home. We have not. If we are to be serious about fighting corruption, we should start by establishing our own anti-corruption strategy in Britain.

I am particularly concerned about the role of the financial institutions in the UK. Banks, advisers and all those people are focused here because of the strength of our financial sector, and they are the very institutions that are facilitating money laundering and helping the corruption that takes place internationally. We saw in the Panama papers that the UK was the second most popular place with which Mossack Fonseca did business. We saw that nearly 2,000 of the so-called enablers—the lawyers or advisers—were located here. We also saw that HSBC was one of the biggest banks involved in the transactions revealed in those papers and that Coutts was second to it. HSBC was used 2,000 times and Coutts was used 500 times. I have argued before, and will argue again, that if the Government are serious about fighting corruption and limiting the role of all those advisers and banks in facilitating it, they ought to introduce a new offence on the advisers and banks and not just look at the culprits. It is the advisers who devise the schemes, and if we could cut that off at the root, we would not have problems later.

The rumoured proposal for the Serious Fraud Office to come under political control via the National Crime Agency at the Home Office is another concern. If we are serious about setting an example in the fight against corruption, we should not allow the Home Secretary to direct SFO investigations. Of course, proper resourcing—whether of the SFO or HMRC—is vital.

I was disturbed at the recent accusation from David Normington about the politicisation of public appointments. Corruption may be too strong a word, but this example, which comes from the Minister’s Department, shows how much we need to do at home to get our own house in order. David Normington accused Ministers of seeking to dismantle the existing system for making senior appointments to public bodies. He specifically accused the Secretary of State for Culture, Media and Sport of trying to fill a prominent position in the National Portrait Gallery with a Conservative. None of the five applicants deemed suitable by Ministers for the job had been put through for interview, although four of the five had substantial connections with the Conservative party, and the Secretary of State therefore refused to accept officials’ recommendations.

It is very disturbing to see the ConservativeHome website actively encouraging Conservative supporters to apply for key public appointments. That may be a little thing, but it is symbolic. If the Government are going to lead the fight against corruption in the world, they have to start by putting their own house in order. The summit next week is an opportunity for action. I hope that it does not turn into an exercise in public relations. The decision on which way we go is in the Government’s hands.

Tax Avoidance and Multinational Companies

Baroness Hodge of Barking Excerpts

Wednesday 3rd February 2016 Commons Chamber

[Dame Margaret Hodge (Barking) (Lab)]

The most bizarre feature of the row over the past 10 days is that both Google and the Chancellor thought they had landed a public relations coup. Frankly, the arrogance of Google and the hopelessness of our Government take some beating. Just look at Google’s results announced this week. It now claims to be the world’s most valuable company. It claims with pride that it has cut its tax rate from 18% to 5%. If we look at Eric Schmidt’s own earnings—the man at the top is very proud of Google’s tax structure, saying “it’s just capitalism”—he was paid £76 million in 2014 alone. That is the equivalent of well over half of what Google paid the British public for all the money it has made out of the British public over 10 years.

[Joan Ryan]

Is my right hon. Friend concerned that the Google agreement could present a threat to future tax revenues by setting a very dangerous precedent?

[Dame Margaret Hodge]

I agree entirely. The Minister talks about the work done by the Public Accounts Committee. The law is not a complete ass. I do not believe that. When the National Audit Office looked at, I think, 10 cases—I will be corrected if I am wrong—it found three where HMRC had not abided by its own rules. Every time something like this happens, it damages British jobs and British businesses—nobody else. We have definite proof that a sweetheart deal was entered into with Goldman Sachs.

[Mr Gauke]

It was five cases, and in every single case Sir Andrew Park concluded that the amount collected was reasonable and the overall result for the Exchequer was good. Those are the facts.

[Dame Margaret Hodge]

No. With the greatest respect, those are not the facts. The judge looked at five cases. The NAO looked at 10 cases and found in three of them that HMRC had not abided by its own rules.

The reason the Chancellor and his team do not get it is the people they talk to about tax. A small army of tax professionals and multinational companies are the only people with whom they converse. I have to say to the Minister that there is a difference between good working relationships, which I applaud, and undue influence and preferential treatment, which I do not. Talking to stakeholders is a good thing. Being captured by stakeholders is a bad thing.

We just have to look at the evidence—and not just the 25 meetings held with Google. If we look at the Tax Professionals Forum, its members are KPMG, Ernst and Young, Grant Thornton and so on. There is nobody from any of the tax campaigning organisations. There is nobody from any of the charities and no academic with a different view. Ernst and Young made £250 million in recent years by advising Google, Apple, Facebook and Amazon.

Let us look at what the Minister has done. He appointed David Heaton from Baker Tilly to the Government’s advisory panel on the general anti-abuse rule, which was supposed to look at closing loopholes. That particular gentleman was captured on video describing

“ways to keep the money out of the Chancellor’s grubby hands”.

Let us look at what happened to Dave Hartnett—within six months he was going to work at HSBC and within a year he was going to work at Deloitte. Let us look at Edward Troup, who is now our commissioner on taxation. He wrote in the Financial Times that “Taxation is legalised extortion.” This is a small bunch of people who all have the same interests.

I want to make two other brief points. The Government say they want companies to pay proper tax, but the Government are obsessed with tax competition. That means far from tackling tax havens and so on, they are trying to make the UK an alternative best tax haven in the world. We only have to look at three changes the Government brought through on the control of foreign company rules, Eurobonds and the infamous patent box tax relief to see that that is right.

We do not know whether the Google settlement is fair, because under the existing law—the Minister is right—we cannot see it. I personally do not accept that HMRC properly challenged Google on the evidence the Public Accounts Committee collected, which demonstrated that it engages in economic activity here in the UK. I personally do not think the whistleblowers were listened to properly. Google does sell here. It does complete sales here. It does research and development here. Its economic activity is here. What on earth is that massive complex in King’s Cross for if not to undertake economic activity?

I have to say to the Minister that he has lost the argument on transparency. He ought to cave in gracefully and open up the books of these multinational companies so we can restore confidence.