Tax Avoidance and Evasion (Isle of Man)

Debate between Mike Kane and Mel Stride

Tuesday 7th November 2017 Commons Chamber

[The Financial Secretary to the Treasury (Mel Stride)]

May I begin by congratulating the right hon. Member for Barking (Dame Margaret Hodge) on securing this important debate and on raising these important issues in her speech? She has, of course, been a determined campaigner over many years on these matters, especially as the Chair of the Public Accounts Committee. I am grateful for the opportunity to speak in this debate and to be given the chance to discuss the Government’s approach to tackling tax avoidance and evasion. I will respond to as many of the points that the right hon. Lady raised as I can.

The Government take all allegations of tax avoidance and evasion extremely seriously. If any new allegations come to light, we will treat them with similar seriousness. We have a strong track record of tackling tax avoidance and evasion. By implementing 75 measures since 2010, we have secured £160 billion in additional tax revenues. But more on that later; I will now respond to the points raised by the right hon. Lady.

The right hon. Lady has raised the allegations regarding aircraft importation into the Isle of Man, which were also covered in the BBC’s “Panorama” programme in the last two days. I should first note that the Isle of Man, like all Crown dependencies, is a separate jurisdiction with its own democratically elected Government, under which it is responsible for fiscal matters. However, under the Isle of Man Act 1979, it has agreed to follow VAT rules very similar to the United Kingdom’s.

While the Isle of Man must apply VAT rules similar to the UK’s, the administration of the tax, including tackling avoidance and evasion, is the responsibility of its tax authorities. However, when required, the UK Government are always happy to provide advice and technical assistance to help the Isle of Man counter evasion and avoidance. I welcome the announcement from the Isle of Man Government that they are conducting a review of their procedures on VAT and the importation of aircraft. I also welcome their invitation for Her Majesty’s Treasury to carry out an assessment of these procedures, and I can inform the House that Treasury officials have been in the Isle of Man today, engaged in that important process. That is a responsible and appropriate approach to addressing these allegations and correcting potential non-compliance.

The UK Government will continue to work with the Isle of Man to help it address these issues and take steps to put an end to any evasion or avoidance. Where there are any problems of tax avoidance and evasion, these should be dealt with by us fixing these issues together and not by ending our co-operation with the Isle of Man.

Let me turn now to some of the specific points the right hon. Lady raised. She referred to the plethora of leaks there have been over the years, and she is quite right. She congratulated The Guardian, among others, on its part in ensuring the dissemination of the information that has come to light. However, there is an important point here, which is that HMRC is determined to follow up any information, from whichever quarter, to ensure we clamp down on tax evasion and non-compliance. Yet despite repeated requests over the last 10 days, The Guardian and the International Consortium of Investigative Journalists have refused to hand over that information. If the right hon. Lady is able to assist in that, as well as congratulating the individuals concerned, that would be of great assistance to the Government and to her endeavours.

[Mike Kane (Wythenshawe and Sale East) (Lab)]

Last night, the chairman of the Cayman Islands stock exchange said that journalists should be imprisoned. Does the Minister not agree that that was outrageous?

[Mel Stride]

I was not actually aware of those comments, but I can say that, from the Government’s perspective, we are certainly not in the business of advocating the locking-up of any journalists.

The second point the right hon. Lady raised was that we were “tinkering at the edges”—I think that was the expression she used—in clamping down on avoidance. Nothing could be further from the facts of the matter. Since 2010, we have brought in £160 billion, as I said, and £2.8 billion of that was from clamping down on those who have sought to hide wealth in overseas jurisdictions. We have one of the lowest tax gaps in the world, and the lowest in our history. She will probably know that if we were to have today the level of tax gap that we saw under the previous Labour Government, we would be about £45 billion worse off as a consequence. That is important money that we need in our Exchequer for the purposes of employing doctors, nurses, teachers and members of the police force, and of keeping our hospitals and all those vital public services that are the hallmark of a civilised society.

The right hon. Lady referred to the Duchy of Lancaster and transparency. The Duchy does of course publish its accounts—it lays them before this House, in fact. There has been no suggestion that I am aware of that any of the Duchy’s activities or investments have been improper or illegal. Of course, the Queen voluntarily pays tax on all the earnings from the Duchy of Lancaster.

The right hon. Lady referred specifically to Bright-House. She is correct in her assertions that it has been fined by the FCA for the kinds of activities that she mentioned. However, those investments were, I understand, primarily made in 2005 under the previous Labour Government rather than under this Government. I believe that the amount invested as at today’s date is something in the order of £3,000 in total.

The right hon. Lady asked why HMRC allowed the Isle of Man situation to happen in respect of VAT and aircraft. Let us see what the investigation yields rather than perhaps jumping to a series of conclusions currently based on—from what I have seen, at least—a couple of television programmes. However, there may well be something there, and we will get to the bottom of it in due course.

The right hon. Lady asked about the sharing agreement in place between the Isle of Man and the United Kingdom in respect of VAT. She is right that there are at the moment ongoing discussions on a new formula. She referred to an automatic uplift in the Isle of Man’s share under that formula—it is a 4.5% uplift—and suggested that it may be overly generous. It will not be in the long run; once all the surveys and research have been carried out, in the event that it is found to be more generous than it should have been, there will be a clawback mechanism within the arrangement. In terms of transparency, once the formula is concluded it will be available within the public domain. On her assertion that this is a one-way subsidy from the United Kingdom to the Isle of Man with regard to VAT, I should say that there have been years when quite the reverse has been the case and there has in fact been a transfer from the Isle of Man to the United Kingdom from which we, and indeed her constituents, have benefited.

The right hon. Lady made a clarion call for us to tackle avoidance schemes and those who enable them. I confess that the Finance Bill that went through this House very recently was not the most entertaining of Bills; it ran to about 775 pages and was highly technical. However, I point her to the provisions within it for ensuring that those who enable tax avoidance will now be subject to sanction and penalty.

I hope that I have covered the majority, at least, of the points that the right hon. Lady raised. I again recognise the sterling work on this issue that she has done over many years, and pay tribute to her for it. I conclude, Mr Speaker, by wishing you a very—