Tax Avoidance and Evasion

Debate between Mark Durkan and Stephen Williams

Thursday 13th September 2012 Commons Chamber

[Stephen Williams]

I entirely agree with my hon. Friend. I am sure that he is delighted that his party is in a coalition with mine, because we are indeed lifting more of the low-paid out of tax completely by progressing towards a £10,000 income tax threshold. We should make taxes simpler as well as lower for people on low earnings.

This is a moral as well as a legal issue, and I think that perhaps we should discuss morals more in the Chamber. We all have a duty to pay, and cash in hand actually means cheating your neighbour. I think that, as Members of Parliament, we should be more courageous about making that clear. I agree with what the hon. Member for Walsall North (Mr Winnick) said about Sir Philip Green, but he is an easy target. We should be clear about the fact that if you are evading tax, it does not matter who you are: it is always wrong.

Health issues also arise, relating to tobacco and alcohol. My hon. Friend the Member for Amber Valley (Nigel Mills) mentioned beer duty. I am the chair of the cross-party group on smoking and health, and later this year I shall chair an inquiry into the smuggling trade—particularly the trade in tobacco, but there are cross-over issues involving alcohol. There is a very easy thing that the Government could do about those problems: they could tighten the bonded warehouse regime. There are currently very few restrictions on who can operate a bonded warehouse. Perhaps the Public Accounts Committee could consider that as well. A large amount of tax is evaded through the misuse of bonded warehouses and, as a result, people consume more alcohol and cigarettes and damage their health.

While evasion should be a black-and-white issue—it is always wrong—in respect of avoidance there are many shades of grey, which is a big problem. At the innocent end of the spectrum, tax avoidance is when people plan to pay no more tax than we in Parliament intend them to pay under the schemes we lay out in Finance Bills every year. I assume most of us have an individual savings account. I opened a new ISA earlier this year with Triodos bank, the ethical bank that has its headquarters in my constituency. Some of us signed a joint letter urging all parliamentarians to set an example by moving our money into ethical providers of finance, such as Triodos and the Co-op bank. By investing in ISAs, however, we are, of course, avoiding some income tax on our surplus capital.

I support all the various enterprise incentive schemes to encourage entrepreneurs to set up new businesses. I should declare a former interest, in that before entering Parliament I was a tax consultant working for some of the large firms that the right hon. Member for Oldham West and Royton laid into, but what we were doing was enabling people who were setting up businesses to take advantage of the reliefs his Government had introduced, in order to encourage more such people to take up good ideas, transform them into a business, create wealth and employ people. That is a good thing; that is good tax avoidance in the dictionary sense. Things go wrong, however, when such sensible planning is stretched too far and there are egregious schemes of avoidance, artificial transactions and contrived schemes.

The Chair of the Public Accounts Committee mentioned the very good exposés The Times did during the summer. As well as attacking Sir Philip Green and other fat cats, parliamentarians should make it clear that we condemn similar activities by those who are popular with the public—pop stars in Take That, premiership football players or Formula 1 racing drivers whom we are asked to believe all live in Monaco. These people make huge amounts of money because of the public enjoyment of what they do and they do not need to mitigate their tax below what the people who watch them perform think they have to pay.

What should we do about this? First, Her Majesty’s Revenue and Customs needs to focus much more on tackling avoidance. The headline figure of the number of people who work in HMRC has been mentioned, but how many people work for a particular arm of Government is less important than what they actually do when they are working. I hope the Minister will confirm that the efforts in the HMRC large business units and high net-worth units will be ever more relentlessly focused. The staff must have the appropriate training so they can match the skills levels of the lawyers, bankers and accountants pitted against them, and they must also have the necessary IT and other technical resources.

We parliamentarians have a duty as well. We can change the rates and rules, and we have done that in several Budgets since the 2010 general election. Last year, the Government tightened the rules in order to block a scheme of disguised remuneration, where individuals were receiving loans from their employers that they had absolutely no intention of ever repaying, and thereby were avoiding income tax. However, the Labour Front-Bench team at the time—I do not think its current occupants were part of that team, so I do not hold them personally responsible—instructed all its Back Benchers to vote against that coalition Government measure.

Under this year’s Finance Bill, we are introducing new stamp duty regimes in order to tighten up on the move of people buying properties via corporate envelopes and thereby avoiding stamp duty. The Liberal Democrats, and in particular my right hon. Friend the Business Secretary, called for that at the last election. Avoiding stamp duty in that way will now be almost impossible unless people want to incur an enormous liability in the future.

I listened carefully to what the right hon. Member for Oldham West and Royton was saying about the general anti-avoidance or anti-abuse regime. His words would have had more force if he had at least acknowledged that this Government had commissioned a report by Graham Aaronson. He has been in the business for more than 40 years, so I cannot think of anyone better to chair a committee looking at how we can tighten up on avoidance schemes. At least this Government are introducing an anti-abuse regime. It may not be perfect to start with, but a rule is being introduced. The right hon. Gentleman’s Government had 13 years to do that, but it was persistently ruled out by the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown).

[Mark Durkan]

Is that observation not a bit like saying that if the Government were looking at creating an anti-strike rule, the person to put in charge would be Bob Crow?

[Stephen Williams]

Would the hon. Gentleman say that again, as I am not sure that I followed it?

[Mark Durkan]

On the logic that the hon. Gentleman has just deployed about the most suitable person to be looking at anti-avoidance, given his skills and predilections in that area, would the equivalent for a Government committing to an anti-strike rule not be to put Bob Crow in charge of that exploration?

[Stephen Williams]

It was the Bob Crow bit that I missed. That may be a fair point, but I would not put Graham Aaronson on the same moral plane as Bob Crow; I do not think that Mr Aaronson has held the public to ransom at various points. However, poachers do often make good gamekeepers. The Government commissioned the report and are acting on it, and they should be commended on doing so, given that the previous Government did nothing to put that in place.

We have talked about the domestic scene, but I wish to say something in passing about our obligations abroad to the developing world. During debates on this year’s Finance Bill, I mentioned how the rules tightening up on controlled foreign companies—that is fine, as it is our responsibility to secure our own tax base—will have unintended consequences for developing countries. It is for the Treasury to work in close concert with the Department for International Development to ensure that every time we change our tax law, we think through the implications that that will have abroad. In addition, some of our expanding aid budget should be expended on training overseas Governments to build up their expertise to make sure that they are able to levy taxes effectively and collect them from the multinationals operating in their countries. I know that a coalition of charities, including Christian Aid, is going to campaign on this issue later this year. I have been working with them, and I look forward to continuing to do so throughout the rest of the year.

Finance (No. 3) Bill

Debate between Mark Durkan and Stephen Williams

Tuesday 5th July 2011 Commons Chamber

[Stephen Williams]

I thank the hon. Gentleman for his intervention, but I have already stated clearly for the record that I share the moral and ethical outrage at the level of bonuses being paid by certain firms in the City and elsewhere. The question is whether reintroducing the bonus tax designed by the Labour Government would make any difference, because the evidence suggests that it made absolutely no difference to the bonus culture. It was a handy device for raising rather more than the expected revenue, but it certainly did not change behaviour.

As a free market liberal, I think that companies should be free to decide their remuneration policies, but they must justify them to their shareholders. One way that behaviour might change would be if shareholders took a more active interest in the bonuses that the remuneration committees award within their companies, whether they are banks or not. As was mentioned in yesterday’s debate, the people on those committees are often executive directors of other companies and so have a vested interest in the magic circle of super bonuses being justified in other companies. If the shareholders of the banks that we own, Lloyds Banking Group and Royal Bank of Scotland, were able to express a view, that would introduce a new dynamic into capitalism.

I hope that the Government will seriously consider giving each citizen a share in RBS and Lloyds Banking Group when the time comes for both banks to be divested from the state—this is another plug for the pamphlet I published in March, “Getting your share of the banks: giving the banks back to the people”. I had an interesting meeting with officials from UK Financial Investments last Wednesday in the Treasury in order to discuss that.

Amendment 31, tabled by the hon. Member for Hayes and Harlington (John McDonnell), proposes a Robin Hood tax. I fully support such a tax, as I have mentioned in many debates in the House. I have spoken with many non-governmental organisations in my constituency and at lobbying events, such as the one that took place last week and has already been mentioned. A Robin Hood tax has three elements. The first is a levy on banks’ balance sheets, and the Government introduced that in the form of a bank levy. We might disagree about the level of the levy, but the important fact is that the coalition Government have legislated for it to exist and said that it will be permanent, in the sense that it will last for the lifetime of this Parliament. The rate has been changed once, as I mentioned in an intervention, and I hope that it might be increased again.

The second element of a Robin Hood tax is a financial activities tax—FAT, as opposed to VAT, which the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) might have phonetic difficulty with when speaking in Welsh, in distinguishing between an F and a V. I hope that the Minister can update us on what discussions are taking place on that between Finance Ministers across the European Union and what progress has been made on the introduction of such a tax, which is a tax on certain profits of the banks.

The third element of a Robin Hood tax is a financial transactions tax, which is the subject of the amendment. As the hon. Member for Hayes and Harlington said, that has traditionally been called a Tobin tax. It would be the most problematic component of a Robin Hood tax to introduce. It might impede liquidity, which is not necessarily a good thing, and the other barriers he mentioned would be difficult to surmount without international agreement between the major trading nations.

Another problem with a Robin Hood tax is the question of how much it would raise, as I have heard a wide variety of figures for that which are in the billions. The hon. Gentleman referred to the great coalition of NGOs that support such a tax, and many of us support them, but I wish that they would agree a figure for what the different components of the tax could reasonably be expected to raise.

[Mark Durkan (Foyle) (SDLP)]

Does amendment 31 not afford the Government the possibility of coming up with such a figure? They could do the very scoping work that the hon. Gentleman says is needed, and surely that is the Government’s job, not the job of all those NGOs.

Parliamentary Voting System and Constituencies Bill

Debate between Mark Durkan and Stephen Williams

Wednesday 20th October 2010 Commons Chamber

[Stephen Williams]

Then there is the state commissioner of the county of Ingham, and then there are all the judges to be elected: two judges for the Supreme Court, one for the court of appeals, and the incumbent and non-incumbent circuit judges for the 30th district. There are also a number of state propositions like the referendum that we are discussing.

There will not be elections for all the officers and elected representatives on 4 November this year. There will be no elections for Lansing or East Lansing local councillors, for a directly elected mayor or a directly elected sheriff, or for the two United States Senators who could represent the people from the state of Michigan; and, of course, there will no election for the President or Vice-President, or for all the appointed politicians who help to run Michigan and the United States.

It is clear that a person living in Michigan could potentially turn to a huge number of politicians, both elected and appointed, to resolve their problems. In my city of Bristol, however, there are only three to whom electors can turn. If we are honest with ourselves, instead of worrying about the cost of politics we should admit that we actually do politics rather cheaply in this country. Rather than electing school boards, as they do in the United States, we have school governors—people who give their time freely to serve their communities. Rather than electing judges, we have either appointed judges or numerous magistrates who give their time freely as well.

A reduction to save costs does not seem justified to me, and it is not yet justified in the context of a wider package of constitutional reform both of this Parliament and of the way in which we govern our localities. I look to the Deputy Leader of the House for assurances that we will be given a comprehensive package of political reform to put this reduction into a proper context.

[Mark Durkan]

Like other Members, I am keen for us to reach the next set of amendments, so I shall make only a couple of points.

Arguments are being presented about whether there should be 650 Members of Parliament or 600. The problem that I have with all the figures—including the 585 suggested by the hon. Member for Christchurch (Mr Chope) and the 500 from the hon. Member for St Ives (Andrew George)—is that they result in just one sum: one magic, supreme and absolute number. That means that when we take away the holy trinity of the three protected constituencies, the boundary commissions must come up with figures that add up to 597.

That will have to be done in Parliament after Parliament, all the while taking account of changes in the numbers registering in different parts of the country, which will force boundary changes in every one of the four constituent boundary commissions. If there is a significant registration increase in part of England, Northern Ireland could lose a seat in the next Parliament. If there is a drop somewhere else, however, we might gain a seat. In each Parliament, therefore, we will be up a seat, perhaps, and then down a seat. In Northern Ireland, that will mean the boundary review will affect every single seat.

That will be one of the consequences of moving to this absolute figure of 600 and 600 only with no elasticity. To repeat a point I made earlier to the hon. Member for Epping Forest (Mrs Laing), I predict that we will end up questioning whether we decided on the change with too much urgency and as a result were left with a fixed, arbitrary limit and the tyranny of arithmetic—the insistence that one size has to fit all in spite of the reality and all other considerations. That will mean that we will end up with an IPSA-type situation for boundaries. In Parliament after Parliament, MPs will regret that they are dogged by all sorts of fairly arbitrary boundary changes that are driven purely by arithmetic and perhaps dictated by registration changes somewhere else. People in many constituencies will wonder why they are constantly having to go through such changes because of something that is happening somewhere else.

Should the Committee insist on going for diktats that will result in reviews having to be conducted every time and arithmetic for establishing a quota for seats, would there not be merit in amendment 228 tabled by the hon. Member for Cleethorpes (Martin Vickers), which takes 600 as a target figure but allows a margin of accommodation to the boundary commissions so that there can be as few as 588 seats and no more than 612? That margin of consideration would at least allow the boundary commissions to take account of the issues and pressures facing them. Under clause 10, the number of seats allocated to them will be fixed under the Sainte-Laguë formula.

Already the Government recognise that the absolute figure of 600—and all the other aspects of the Bill—cannot be fully applied in respect of Northern Ireland, so they have had to say that in Northern Ireland the seats can vary more widely than the 5% either side of the UK quota. Therefore, we can come in at lower than 5% or over 5%, so our constituencies can be more disparate. That proves that the hon. Member for Epping Forest is wrong in saying that there are no adverse consequences and that the rigid application will not be a problem. The Bill admits that the rigid application is a problem, and it means that Northern Ireland will not be getting equal constituencies. We will have much more disparate constituencies as compared with other parts of the UK. More importantly, we will have much more disparate constituencies in the Northern Ireland Assembly, for which there are six Members. Therefore, disparity of representation and of mandate will arise in, of all places, Northern Ireland and Northern Ireland only. That was not what was intended when this House, as well as everybody else, supported the Good Friday agreement and its provisions.

I therefore ask the Government to consider the very sensible recommendation in amendment 228. Its sister amendment 227 does not accommodate the situation in Northern Ireland, because it allows only a 2% margin of discretion. It should allow for at least 2% or at least one seat. If that could be inserted in the Bill, it would help.