Tax Avoidance, Evasion and Compliance

Debate between Mel Stride and Nicholas Dakin

Monday 4th March 2019 Commons Chamber

[Mel Stride]

It is very important for us to be extremely clear as to what disguised remuneration is all about. It is a situation where I, as an employer, instead of paying an employee in the normal manner, on which basis PAYE would be due—that would be income tax, employee’s national insurance and employer’s national insurance—I say to the employee, “Look, we’ll do it a different way. I’ll send some money out, typically into a trust in a low-tax or no-tax overseas jurisdiction. That money will then come back into the United Kingdom disguised as a loan”—not a real loan, as the hon. Lady and I would recognise, but one where there is no expectation that it will be repaid—“and, as a consequence because it is treated as a loan and not earnings, it attracts no tax at all.” This Government do not believe that is right.

[Nic Dakin (Scunthorpe) (Lab)]

Clause 95 of the Finance Bill 2019, which the Government accepted on Report, agreed a review of the loan charge. I have met constituents. They are ordinary folk who, when they were working for particular people, were told that this was the arrangement they had to make. They are now suffering huge penalties, although they are still not clear exactly what those penalties are because HMRC keeps changing the rules. Following the question of the hon. Member for Bromley and Chislehurst (Robert Neill), will there be a proper independent review that reports by 30 March and allows time before these things come in? I like the Minister a lot and I think he is a good Minister, but what he just said suggests that the Government have already determined the outcome of that review, which is not very helpful.

[Mel Stride]

I am sorry if the hon. Gentleman formed that opinion. We are certainly not going to prejudge any review on any aspect of tax, whatever it may be. I gently say to him, and to those who got involved in these schemes, that by and large when something looks too good to be true, it is too good to be true. Where hon. Members refer to very large demands for tax, we are, of necessity, looking at situations where very large amounts of money went through tax avoidance schemes. We have had debates in this House in which Members have raised tax demands, on behalf of their constituents, of up to £900,000. In those circumstances, about £2 million-worth of income would need to go through one of those schemes in order to result in an unpaid tax bill of that magnitude.

Taxation (Cross-border Trade) Bill (Third sitting)

Debate between Mel Stride and Nicholas Dakin

Committee Debate: 3rd sitting: House of Commons
Thursday 25th January 2018 Public Bill Committees

[Mel Stride]

I will take the hon. Lady’s references to “you” as not meaning the Chair of this Committee, but me. The issue that she has raised, which ran in the press a few weeks ago, relates to an issue for the Home Office and Border Force, not HMRC. It is outside the immediate scope of this Bill. I know that at least one Minister in the Home Office was able to refute those suggestions, but I will not dwell on that in this Committee.

[Nic Dakin (Scunthorpe) (Lab)]

The other thing that came out in the evidence was the concern about the loss of experience at a critical time. Is the Minister giving us a strong assurance—I think he is—that there will not be any problems as we move forward? If there are any problems, the Minister and HMRC will be jointly and severally responsible.

[Mel Stride]

I thank the hon. Member for his very helpful intervention. Of course Ministers have responsibilities for the areas that they oversee. I can assure the hon. Gentleman that I have had discussions with HMRC staff, including the head of HMRC, and we have looked specifically at the right mix of skills and people, so I am confident that we will have the right team in place to meet the challenges ahead.

Question put and agreed to.

Clause 3 accordingly ordered to stand part of the Bill.

Schedules 1 and 2 agreed to.

Clause 4

When liability to import duty incurred

Question proposed, That the clause stand part of the Bill.

Taxation (Cross-border Trade) Bill (Fourth sitting)

Debate between Mel Stride and Nicholas Dakin

Thursday 25th January 2018 Public Bill Committees

[Mel Stride]

It is a pleasure to serve under your chairmanship, Mrs Main. I thank the hon. Member for Bootle for his remarks. His usual brilliance was enhanced by an unknown quality of being able to summon dramatic music to enhance his comments. He gets better and better, the longer we hear from him.

The hon. Gentleman raised various general points, including the fact that this is, in effect, a Finance Bill and therefore will not be amended in the House of Lords. There are good reasons for that. There is a very, very long tradition for Bills that relate substantially to tax and the rating of charges to be handled in that way—both by this Government and by Labour, when it was in government.

[Nic Dakin]

But the Bill does go into the House of Lords, and I am sure that the Government will be listening carefully to what their lordships say.

[Mel Stride]

The Government of course listen to everybody who has an opinion—or, should I say, a relevant opinion; a rational opinion, even—on the matter in hand, and we will continue to do so.

The hon. Member for Bootle raised the obvious and important point that with Brexit in the round, we are looking at a big constitutional change—I think that was the expression he used—which is undoubtedly true. However, he seized on that known fact to suggest that in the narrow case of the change in the duties on specific goods, we should therefore have a highly augmented level of scrutiny. I do not think that the two things are linked. The Bill deals narrowly with duties, and more robust scrutiny is suggested through the affirmative statutory instruments for the first introduction of the tariff and for all duties that are changed in an upward direction afterwards. He stated that there will be a huge change, but the Bill’s purpose is to narrow down that change wherever we can, not least regarding our tariff arrangements.

Taxation (Cross-border Trade) Bill (Second sitting)

Debate between Mel Stride and Nicholas Dakin

Tuesday 23rd January 2018 Public Bill Committees

[Mel Stride]

Q A final question to Rosa, which goes back to Mr Menzies’s question. What is the specific trade case you can cite where the application of the lesser duty rule has failed?

Rosa Crawford: I refer to the specific case about solar panels, and I am happy to provide more information. The trade remedies alliance has done additional research that we can supply to the Committee, so there is evidence that we can supply that it has not been effective.

[Nic Dakin (Scunthorpe) (Lab)]

Q On the lesser duty rule, as a result of things such as the steel crisis, the EU is moving to be exception-based, in line with Canada, Australia and others. Is there a lesser duty rule anywhere else in the world that will operate like this one?

Ben Richards: Not that I am aware of, and I think that what happened with that steel crisis is one of the reasons our members do not have confidence in what is in the Bill at the moment. Even with the reservations that we have about the way EU trade remedies worked, as Kathleen spoke about, the EU was trying to deal with that situation. Unfortunately, our members felt that it was their own Government who were holding back the process of imposing sufficient remedies at a European level to deal with the situation of Chinese steel dumping.

--- Later in debate ---

[Nic Dakin]

Q What is your view on the Henry VIII powers in this Bill and their impact on this area of legislation?

Joel Blackwell: It is a good question. Referring back to Ms Blackman’s question, I think all Henry VIII powers should be subject to the affirmative procedure unless the Government give a compelling reason, and we do not think that that has happened in the Delegated Powers Committee note. The six Henry VIII powers contained in this Bill are not as wide as clauses 7, 8 and 9 of the European Union (Withdrawal) Bill or the clauses we have seen in the Legislative and Regulatory Reform Act 2006 and the Public Bodies Act 2011. They are constrained merely by the fact that this Bill is focusing particularly on taxation, border trade, customs arrangements and what-have-you. So I think, in keeping with the views of the Delegated Powers Committee, that the affirmative procedure would be sufficient in this context.

However, parliamentarians, particularly in the House of Commons, have made it clear over the last few months that there are issues with the scrutiny of delegated legislation—more so than they have since we have been doing our research. In particular, there seems to be a view that they would like to have more meaningful and effective oversight over Brexit SIs. The sifting committee was intended to be part of that, but at the moment the sifting committee will only look at clauses 7,8 and 9 of the European Union (Withdrawal) Bill and will not touch the other Brexit-related Bills. If it is still the view of the House of Commons that they would like to look at all Brexit-related SIs then you could, for example, insert into Standing Orders that the new European statutory instruments Committee looks at clauses 42, 45, 47 and 51 of this Bill if it so wishes.

[Mel Stride]

Q Thank you for your evidence. The negative SIs, on balance, given that they do not necessarily get “called in”, for want of a better expression, are on average scrutinised less than affirmative SIs, but is there anything that would in any circumstances stop an Opposition party calling one in? Is there any reason why they would be out of the reach of scrutiny, should the Opposition decide that more scrutiny was appropriate?

Joel Blackwell: A Member of either House who wants to pray against or seek to annul a negative instrument has to do so within a 40-day period. That is one of the restrictions: you have to do it within 40 days, otherwise you have the situation that arose with the personal independence payment regulations and the student fees regulations. The Opposition wanted to debate those regulations but the 40-day period had ended, so they used Opposition day debates in another Session. They had to hold the debates on “revoke” motions, and there was the issue of whether those would be statutorily binding if the Government were defeated. It turned out that the Government did not vote at that point. So there is that limit.

We think the negative procedure is fundamentally flawed, because in order to debate a negative SI, an MP has to use an early-day motion, for which no fixed time is allocated. That means that whether a negative instrument is debated is purely in the hands of the Government. We would like to see that changed. In “Taking Back Control”, we proposed that a new sift and scrutiny committee should be created, and that that power should be given to that committee. You would have to tweak Standing Orders to ensure that the debate was heard, but that is our view.

--- Later in debate ---

[Nic Dakin]

Q How does the UK’s proposed system of public and economic interest tests compare with elsewhere, and are you happy about the proposals as they currently are?

Dr Laura Cohen: I want to explain that the EU uses a Union interest test as a sanity check, to balance the possible conflicting interests of member states. The wording of the rules around that test are crucial. For example, in the tiles renewal that I just talked about, the Official Journal text says:

“In weighing and balancing the competing interests, the Commission gave special consideration to the need to eliminate the trade distorting effects of injurious dumping and to restore effective competition.”

It is essential, if the UK is doing that sort of test, that such clarity of purpose is in the Bill that you are considering. It is not at present.

I would argue, as my colleagues said earlier, that addressing dumping is always in the long-term consumer interest because it restores a competitive market. We would expect the Competition and Markets Authority to take strong action if UK companies were not playing by the rules. In the absence of international competition laws, strong trade remedies are the best we have. The EU is only one of five countries or areas out of 32 main anti-dumping users in using that type of test. In Brazil and Canada, it is a conditional test used in certain circumstances only.

What is the UK proposing? First, I want to state that the WTO does not require a public interest test. It appears in the Bill as if the UK is proposing something very new to replace the Union test. That seems to run counter to the principle that global free trade cannot mean trade without rules. As some of the previous witnesses said, three opportunities are provided to stop remedies against rule breakers. The text in the Bill suggests the three stages, the first of which is an economic interest test by the TRA. The research commissioned by the Department for International Trade strongly hints that that may contain a cost-benefit analysis and/or an economic model. No other country uses that approach. The USA tried it and stopped. The Union interest test is just a sanity check. Secondly, if the Secretary of State does not like the result by the TRA, he or she may overrule it with their own economic interest test. Finally, that may be overruled again by the Secretary of State’s public interest test. A recent article in The Telegraph—we can provide a link if the Committee wishes—alluded to the implications of a potential UK-China free trade agreement and inward investment being weighed up in such a test. If true, that would be highly alarming.

Those second and third tests are not carried out in the EU. They add a lot of uncertainty to the process, particularly with a very unclear presumption at present in favour of adoption of duties in the Bill text. No wonder some UK manufacturers are scared witless by this. I think you heard similar emotion from the unions. Manufacturers have enough uncertainty around Brexit to cope with, without the fear that if they bring a case, despite dumping and injury being found there will be three chances for that ruling not to be implemented, and they might have all sorts of legal challenge. We heard this morning that the Bill is not even clear if we can do that.

[Mel Stride]

Q Thank you very much. It is very good to see you again—I know we had a very recent meeting, Laura. Just for clarity, because I do not know whether this suggestion was being made or not, from the Government’s point of view we do not equate sensible, proportionate trade remedies with protectionism at all. We see the value of those, just as everybody else on the Committee, and indeed yourselves, does.

Can I just go into the area of the lesser duty rule in a little more detail? To the extent that the lesser duty rule functions as proposed, and it does provide remedy for injury caused through dumping to those producers who have been affected, why would you want to go further than that in terms of a potential remedy? Why would you want to go beyond that particular threshold? The argument from consumer groups is that that will then start disproportionately to damage consumers and those businesses that use those imports within their own production processes.

Dr Laura Cohen: I am going to let Gareth answer first. Then I will come back and refer to what the unions were talking about; I have some evidence from the alliance.

Gareth Stace: It seems that we are constraining ourselves in the UK when we do not need to. One of the aims of Brexit was to strip things away, make things more simple and have fewer people employed working on these things; much of what we have seen in both Bills seems to add layer upon layer that is probably not needed. The lesser duty rule is used quite a lot in various different regimes, but it is not used in the US at all. We want to create strong links with the US in terms of trade, so that seems a bit odd.

We could say yes, but I could not tell you that if we did not have the lesser duty rule, we would have seen less dumping in recent years. The lesser duty rule has not meant that new cases did not stop dumping. The point I would like to make is this: we are always told that the lesser duty rule ensures that the consumer is not ripped off—that prices do not rise significantly because tariffs are imposed at too high a rate.

I have an example. In the hot rolled coil case recently—hot rolled flat is used for car bodies and washing bodies, but I am using the example of the car—the injury margin was 17.5% and the dumping margin was 29%. That is a difference of 11%. So the 17.5% was applied, not the 29%. If we think of a luxury car that cost €45,000, because this is a European example, if the lesser duty rule was not applied in this case, it would increase the value of the €45,000 car by €16. We are not suddenly going to see runaway costs and the poor old consumer having to pay lots and lots more. We are going to have a robust system that ensures that we have free liberalised trade continuing as a safety valve. In that case, it increases the cost by €16 on €45,000.

Paradise Papers

Debate between Mel Stride and Nicholas Dakin

Monday 6th November 2017 Commons Chamber

[Mel Stride]

The Government are leading the way in exactly that endeavour. As I said earlier, a very important point to note is that we have a multilateral approach to this issue, and we are working hard at delivering on it.

[Nic Dakin (Scunthorpe) (Lab)]

Most people have not heard of dollar-denominated trading, but they look at this matter and see one rule for the rich and powerful and another for the weak and vulnerable. Surely the way to lance this boil is to provide full transparency, which means making information publicly available rather than people having to ask about British overseas territories.

[Mel Stride]

I have explained about the transparency that we need. We need to ensure that HMRC obtains the information that it requires to satisfy itself that the dealings in those territories are being carried out appropriately, and that is exactly the position that we are working towards at present.

Tax Fairness

Debate between Mel Stride and Nicholas Dakin

Tuesday 12th March 2013 Commons Chamber

[Nic Dakin]

I am afraid my hon. Friend is also luring me down a route that I would rather not go down, because I would not like to face your ire, Mr Deputy Speaker.

[Mel Stride]

The hon. Gentleman is being exceedingly generous in giving way. As he has said, he is keen to talk about tax fairness. He referred earlier to the iniquity of reducing the top rate of tax for higher earners from 50p in the pound to 45p, which is coming up this April. Does he therefore not accept that, in his terms, the last Labour Government acted totally unfairly in having a top rate of just 40p in the pound right the way through until the last 36 days of his Government?

[Nic Dakin]

I thank the hon. Gentleman for his intervention, but I have not yet said that—I am going to say it later, so I will come to his point when that is appropriate.

I was describing the difficult choices that hard-working families are having to make to keep their heads above water. The obligation we face—those of us who govern, as well as those on the Opposition Benches—is to make difficult choices about where revenue is raised. It is therefore right and proper to look at ways of taxing people who have significant wealth, such as people who own properties valued at more than £2 million. Therefore, it is right and proper to look at ways of ensuring that that part of our nation makes a contribution in these difficult times.

We know that people of great wealth are sometimes quite imaginative and inventive when it comes to avoiding taxes. I commend the work of Government over the ages to find ways of tackling tax avoidance—this Government have done a number of things that are to be welcomed. Property is obviously difficult to hide. One of the big advantages of a property tax—a mansion tax, as expounded over the years by the Liberal Democrats in particular—is that it is difficult to avoid paying, because property is visually identifiable. As my hon. Friend the Member for Westminster North (Ms Buck) said earlier—she is no longer in her place—60% of high-value properties in London are owned by people from overseas. Indeed, I note the comments of the hon. Member for Rochester and Strood (Mark Reckless) on this issue. He made an intelligent and helpful contribution to the debate.

I am pleased to see the hon. Member for Eastleigh (Mike Thornton) in his place and I very much welcome him to the House. I am sure he will continue to build on his excellent maiden speech and make good contributions to the work of the House. However, prior to the by-election, the Deputy Prime Minister, writing in The Observer, described the Prime Minister as being “stuck in the past” for opposing the mansion tax. The Observer commented that this came

“amid signs that the Liberal Democrats are ready to challenge the Tories more vigorously over key aspects of economic policy.”

Today’s debate is an ideal opportunity for them to do that. The Deputy Prime Minister attacked the Prime Minister in his article, saying that the Conservatives were instinctively against fairer taxation

“even as people on lower incomes feel the pinch”.

He said that the plan for a mansion tax on properties worth more than £2 million, which was being backed by the Labour party, was an idea “whose time has come”, and said it was a “certainty” that some levy on high-value properties would be introduced soon. He continued:

“The Conservatives and opponents of fairer taxes have a choice. They can dig their heels in and remain stuck in the past. Or they can join with the Liberal Democrats and the chorus of voices seeking to make our tax system fair. Far better, surely, to move with the times.”

I very much welcome the Deputy Prime Minister’s rather prophetic contribution to this debate. It puzzles me that the Liberal Democrats who have spoken so far have indicated that they might not support the motion. However, a number of them have been here for a large part of the debate, so I hope they will be persuaded by the power of argument.

It is worth noting that the motion says:

“That this House believes that a mansion tax on properties worth over £2 million, to fund a tax cut for millions of people on middle and low incomes, should be part of a fair tax system; and calls on the Government to bring forward proposals for such a tax at the earliest opportunity.”

As my hon. Friend the Member for Nottingham East (Chris Leslie) said from the Opposition Front Bench, nothing could be simpler. Indeed, this is the sort of simple motion that the Business Secretary called for and that the Deputy Prime Minister called for before the Eastleigh by-election. Indeed, the hon. Member for Bristol West (Stephen Williams) confirmed today that he could have written it himself, so one wonders why the Liberal Democrats cannot support it. One is helped to understand why they cannot do so by reading the rather entertaining amendment, the middle of which

“notes that the part of the Coalition led by the Deputy Prime Minister…advocates a mansion tax on properties worth more than £2 million, as set out in his party’s manifesto, and the part of the Coalition led by the Prime Minister does not advocate a mansion tax”.

We have a pushmi-pullyu Government, pushing in one way and pulling in the other. We have a real pantomime horse, as my hon. Friend the Member for Nottingham East said, from a pantomime Government, but this is not pantomime time. It is a serious time, and a serious time requires serious politics. The Liberal Democrats have an opportunity to stand by their principles—to stand on the side of honest, hard-working people—by coming into the Lobby this afternoon to support our motion, which could have been written by the hon. Member for Bristol West.

Education Performance

Debate between Mel Stride and Nicholas Dakin

Thursday 12th May 2011 Westminster Hall

[Mel Stride]

I thank my hon. Friend the Minister for helpfully reminding me of that. I am sure that the shadow Minister will address that comment in due course.

Whether we have gone up or down a bit in such surveys is not the main point, as a number of hon. Members have said. At the end of the day, as I shall demonstrate, being average or around average is simply not good enough—as I think the Opposition accept, including the hon. Member for Liverpool, West Derby (Stephen Twigg) who very much stressed that point. According to the 2009 league table, if we were to have achieved at the level of the best—for example, Finland—67% of students in this country would have obtained five A* to C grades, including English and mathematics. The actual figure is just 49.8%. That is a huge loss of human capital and is to the enormous detriment of students who did not achieve those grades as a consequence of us not being the best. Average performance is clearly changing through time because those countries with good education systems that consistently put them at the top of the table are good at adapting and innovating. Such countries are not standing still and they are getting better.

[Nic Dakin (Scunthorpe) (Lab)]

Interesting evidence given to the Select Committee on Education this week from the OECD demonstrates how complex the matter is. What does the hon. Gentleman have to say about the OECD’s report that, although Finland is very good in terms of attainment, it is very poor at getting young people into employment? The UK is better at that than, for example, Finland. These issues are complex.

[Mel Stride]

I thank the hon. Gentleman for his point. Of course, these matters are complex. That is exactly what I have been arguing. However, there is no getting away from the fact that we have remained average for far too long across too many measures—PISA, TIMSS, the progress in international reading literacy study and so on.

PISA is, indeed, a complex study. It looks not just at 15-year-olds in terms of reading, mathematics and science, but at the background of those students. It looks at their aspirations and attitudes and how the schools in which those students are studying function. One of the key conclusions that is drawn by the OECD from those studies is that education in this country is not promoting social mobility to the extent that it should. One of the ways of identifying that point is to look at the different achievement levels of individual pupils. There is a high correlation between social deprivation and poorer students, and lower achievement. In fact, 13.9% of a student’s achievement can be attributed to their socio-economic background. That figure is far lower in other countries, including in Finland at 8.3% and Canada at 8.2%.

That brings me on to my next point. This is not a zero-sum game where having excellence and achieving well in these league tables means letting down poorer students. It is quite possible to achieve both—to make sure that we are at the top of the league table and that we are doing well by students from less advantaged backgrounds. That has been shown not just by Finland and Canada, but by Japan and South Korea. In this country, we have for too long tolerated a long tail of underachievement in the distribution of education performance, which is why I am pleased that a lot of the Government’s very radical education policies are specifically designed to address that.

My final point—I will be brief—is that the PISA studies also highlight the link between various underlying factors in education and performance, for example, the key effect of operational independence of schools on results. There is a clear correlation between schools being allowed to get on with it and good educational achievement. That is one of the reasons why I welcome the free schools and academies programme we have put into effect. Standards-based external examinations are also key drivers of performance in education. I also welcome the English baccalaureate and very much subscribe to the comments that my hon. Friend the Member for South West Norfolk made about it.

The quality of teachers lies right at the heart of the issue and is absolutely key; in fact, it is referred to in the title of the White Paper that we have brought forward. It is absolutely right to raise the bar on qualifications for teachers and to be more rigorous in selecting them. That includes taking a close look at interpersonal skills as well as academic qualifications. I urge the Minister to look very carefully at the point about interpersonal skills for teachers. We can all remember from our student days—in my case, at Portsmouth Grammar school in the constituency next door to that of my hon. Friend the Member for Portsmouth North (Denny Mordaunt)—those teachers who were highly-qualified, but could not inspire. It is very important that we do what we can to identify them.

The final point that comes out of the PISA and OECD analysis is the importance of the culture in a school, specifically as regards discipline, an issue mentioned by my hon. Friend the Member for South Basildon and East Thurrock (Stephen Metcalfe). I welcome the Government’s approach: 24 hours’ notice will no longer be required for detentions; pupils may be searched if teachers are concerned; anonymity will be provided to teachers who face serious allegations from pupils; and head teachers and governing bodies will have more autonomy over exclusion. As a governor of a school, I think that all those things are absolutely spot on, and I congratulate the Government.

This is an important debate. For too long, measuring success in education has been with reference to the past. It has been done with reference to inflated examination results—results pumped up by resits, continuous assessment and diminishing examination standards—and we have simply disguised failure by doing that. Worse, we have also failed far too many of our young people. I congratulate my hon. Friend the Member for South West Norfolk on securing the debate, and the Government on placing international standards right at the heart of our education policy.