Tax Avoidance and Evasion

Matt Western Excerpts

Tuesday 25th February 2020 Commons Chamber

[Matt Western (Warwick and Leamington) (Lab)]

May I start by congratulating the two new Members on their maiden speeches—the hon. Members for Stourbridge (Suzanne Webb) and for West Bromwich East (Nicola Richards)?

The business of tax avoidance, as has been discussed this afternoon, is a serious issue. We show extraordinary world leadership in this, but for all the wrong reasons. Since 2010, a permissive attitude to tax avoidance has been allowed to develop. Let us think back to Chancellor George Osborne and how he advised people on TV just to think, “Well, you know, all you need is clever financial products to help reduce your tax costs”. It really sent out the wrong signal—“Why pay tax at all? Pay the least you possibly can”—as opposed to being responsible and recognising the benefits of tax.

That has been facilitated by the growth of professional enablers. We saw that with the Panama papers, which laid bare the industrial-scale activity in tax havens such as the British overseas territories and Crown dependencies. We think of the Cayman Islands, which is the most secretive territory of all, and the British Virgin Islands, Guernsey and Jersey, which are in the top 20. Just last week, the EU blacklisted the Cayman Islands as the first UK territory on the non-co-operative list due to its tax haven status.

Do not get me wrong—I understand that this is a global problem and it needs international action—but we actually have to go to Davos to talk about these things, and of course the Prime Minister was a no-show there as well. It needs international action, and the UK should be looking to lead on this to restore its reputation. We need leadership, not just simply to be tax lackeys. The Government need to exercise control, not cede control. Let us look at the big accountancy firms. I appreciate the points made by the hon. Member for Thirsk and Malton (Kevin Hollinrake), and I agree with him that on the one hand they are advising the Government, but on the other hand they are advising businesses, and I do not see how we can quite square that particular circle.

[Mr Kevan Jones]

Does my hon. Friend agree that it is long overdue that some of the big accountancy firms should be broken up? There is not really competition among these firms; there are cartels in some situations.

[Matt Western]

My right hon. Friend makes a very good point. With just those four businesses, they absolutely dominate the sector. I do fear that there is a cartel operating, and the sector should be broken up. I think that would be in everyone’s interests. Those firms—or certainly their UK arms—account, according to an HMRC report, for half of all known avoidance schemes. That is the scale of the problem.

This is coming at a massive cost—a loss to UK plc —that is estimated at between £35 billion and £90 billion. There is understandable public anger out there, because that money could be buying significant investments in our communities, whatever people may want to invest it in. That could be 40 new hospitals, two new aircraft carriers or 40 Typhoon jets—all for £35 billion, with some cash to spare. If the £90 billion takes their fancy, we could electrify the Chiltern line serving Warwick and Leamington, and then put money into free school meals for all. Instead, we have an attitude where we increasingly see flat regressive taxes, such as the rise in VAT in 2010 from 17.5% to 20% and the growing expansion of council tax, again hurting hard-pressed households.

[Matt Rodda (Reading East) (Lab)]

My hon. Friend is making some excellent points about the inequities in the system. I feel that is particularly relevant given that only recently did average incomes catch up with those before the great crash of 2008. Does he agree that there has been a total and utter lack of leadership from the Government on this matter?

[Matt Western]

Yes, there has. As I have said, the former Chancellor showed the wrong sort of leadership when he basically said about taxes, “It is almost entirely down to you whether you choose to pay it or not.” Tax really is the responsibility of us all: it is a corporate responsibility and it is a personal responsibility.

Decades ago, when I was working in the corporate world, I remember the introduction of a thing called corporate social responsibility. It was a real buzz term, and we started making donations to charities, volunteering and so on. Of course, that is important and it is wonderful that big business does that, but we are seeing this almost replace tax responsibility. Rather than paying their way and supporting education, infrastructure and healthcare for society, we are seeing organisations perhaps decorate a community centre or go out on litter picks and the like.

Turning to personal tax avoidance, I have mentioned the former Chancellor, and there are schemes such as the film production scheme. Businesses have increasingly paid out dividends, substituting them for actual salary, because of course there is lower tax to be paid on dividends and it is advantageous to employees or directors to get a much larger proportion of their income through dividends. All we need to do is go to some of the ports around Europe, and see that the yachts in the berths there are all flying flags of convenience—and they are all UK flags or those of UK overseas territories and Crown dependencies. There are no German flags, dare I say it, or Dutch flags or French flags. Either we are renowned for our sailing, or a lot of Germans or those of other nationalities like flying the British flag because— I do not know—they sail better or something like that. The same could be said about personal jets and where they are domiciled.

Let me just say that tax is good: it is a contribution to a better society, and we must think about what that society looks like. We should look at the words of Elizabeth Warren. Let me just paraphrase her; I will not do her justice. She basically said, “Why is it that people should simply want to avoid paying tax and then be able to afford to buy a Ferrari? There is no point in owning a Ferrari, if they have not got a good road to drive it on.” People should pay their tax and get a Jaguar Land Rover or Aston Martin—obviously, because they are much better products anyway—and drive on a beautiful smooth road that has been paid for out of their taxes. That is the sort of society we should be looking for, not people avoiding tax, living behind gated communities, owning Lamborghinis, Ferraris or it whatever may be, and having roads full of potholes.

The Government need to turn up on this issue: they need to go Davos and places like that, and make the case for why international intervention and regulation need to be introduced. I agree with what the hon. Member for Amber Valley (Nigel Mills) said earlier about full disclosure. We need to see that across the entire business sector, whether for small businesses or large businesses. When we talk about consumers being given an informed choice, I think the consumer should know whether Caffè Nero is not paying any tax at all, or whether Costa or one of the others is paying tax, and they can then make an informed decision. They can choose, saying, “Well, maybe I want to buy my coffee from that place”, or whatever the product or service may be.

I want to close on the issue of the tech titans. I say this to them: Amazon, you have your warehouses, and your warehouses need security. They need protection from fire; who is going to show up? Warwickshire fire and rescue service has had significant cuts, and it needs the money out of taxation to pay and provide for the fire and rescue services.

[Nick Smith (Blaenau Gwent) (Lab)]

It is estimated that five of the big tech companies paid an effective UK tax rate of just 2.9% in 2018. They avoided paying £1.3 billion in taxes. Does my hon. Friend agree that the Government need to get that money back?

[Matt Western]

Indeed they do, and I was just about to say in respect of companies such as Facebook that services impact on mental health. We need those services; they need to be paid for for our young people. I say to Apple and Google: your product upgrade and replacement cycles lead to huge waste in recycling. You have to pay your taxes; it is a responsibility that we deserve from you, to pay for our society.