HM Revenue and Customs

Debate between Mark Field and Julie Hilling

Tuesday 5th February 2013 Westminster Hall

[Julie Hilling (Bolton West) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Howarth. I start by congratulating my hon. Friend the Member for Hayes and Harlington (John McDonnell) on securing this important debate.

In 2010, the Public and Commercial Services Union commissioned one of the most comprehensive calculations of the UK tax gap ever undertaken. The report, by Tax Research UK, estimated that the tax gap could be as big as £120 billion a year. I accept that the report was criticised by tax professionals, Ministers, HMRC and many large companies, but we have learned since 2010 that that estimate is likely to be more accurate than HMRC’s estimate of £35 billion.

What is the tax gap? The tax gap includes tax lost to avoidance, which is people seeking to minimise their tax bill without deliberate deception, but contrary to the spirit of the law. A good example was seen when tax for those earning £150,000 a year went up to 50% and some payments were brought forward, so that people subject to the 50% tax rate did not pay tax on that amount of money. As we see now, payments such as bonuses are being paid late, so again, they miss the 50% tax rate. That is immoral, as I am sure that many in the Chamber would agree, but it is not illegal. There is also tax lost to evasion, which is the illegal non-payment and underpayment of taxes by making a false declaration. Interestingly, that includes not only fraud, but error and neglect, which I will briefly come on to later. The tax gap also includes late or non-payment of tax—tax not due or not paid on time.

Whether the tax gap is £35 billion, £120 billion, or somewhere in between—or, as some of the recent scandals with well known names show, possibly even higher—it is a heck of a lot money, and it could make a real difference at this time of austerity and devastation of public services. All Labour Members will argue that we need to grow our way out of a recession, and we can see the current consequences of trying to cut our way out of it, as the triple-dip looms. However, fundamental to that growth must be the effective collection of tax, and it seems the closure of local offices does not make financial sense.

When Starbucks, Amazon, Google, and the others were exposed for arranging their tax affairs so that they did not pay their taxes here, all of us could recognise that something was wrong. All who used their shops and services could say, “Hang on a minute. How could enormous companies like that be paying such little tax in this country?” They are household names. We could all question it.

[Mark Field]

It is important in the context of Starbucks and the other companies to point out that much as there was public outrage, they pay significant amounts of value added tax on the products that they produce, and they pay significant amounts of employers’ national insurance on the number of people that they employ. I accept that there was a lot of unrest, but to suggest that they pay no tax at all misrepresents the situation.

[Julie Hilling]

I accept the hon. Gentleman’s point, but it is like saying, “I pay VAT when I buy things in shops, and I pay other taxes.” People who are employed by all of us pay national insurance, but there is that whole bit of tax that should be paid, and there are those who are not doing so. As we know, many individuals and companies manage to avoid paying it, and as has been said, the tax system is so complicated that it makes it easy and possible for people to avoid tax. It is wrong, and in my view, absolutely immoral that people, particularly at this time of austerity, do that.

If Fred Bloggs of Bolton or Freda Brown of Wigan do not declare all of their tax, how will the tax collector in another area have any idea of the scale or scope of their business when they are not household names? Local knowledge is invaluable and it is a real asset in ensuring that the right tax is paid. As other hon. Members have said, it is also an important service in the local area. It is about assistance so that people can try to get their tax right, so that they are not evading tax by error or neglect—unwittingly or unwillingly. They should have people to talk to on their doorstep. Again, as others have said, HMRC is an important local employer with an important role in the local economy.

It is a disgrace that 20 million calls were not answered in 2011-12, that the estimated cost of calls was £33 million, and that the value of customers’ time was £103 million. How can we support and run a system that costs businesses so much? We need to be working to build our economy. How can it be right that trying to talk to people about paying tax costs industry that amount of money? It is a service that earns money. It beggars belief that we are cutting it to the level that we are, and reducing staff by almost 50%.

I am running out of time, but I hope that the Minister will explain how he expects to collect all the tax that is due by nearly halving the number of tax inspectors, by closing local offices, and through the cuts that are taking place. Having served on the Finance Bill Committee and seen even more taxes introduced from the previous Budget, I hope that the Minister will explain what the Government will do to simplify tax as a whole, so that people do not either manage to avoid or unwittingly evade their tax.