Finance Bill

Debate between Mike Wood and Rob Marris

Monday 5th September 2016 Commons Chamber

[Mike Wood (Dudley South) (Con)]

As a Conservative, I believe that taxes, whether direct or indirect, need to be kept as low as possible, consistent with the need to raise finances for our vital public services and for our national security. Unnecessarily high taxation not only strangles growth and development but means Government taking from those who have earned money, whether through labour, innovation, or capital.

However, the flipside of keeping tax levels low is that everybody must pay their fair share. Aggressive tax avoidance, bending the rules of the tax system to gain an advantage that Parliament never intended, means that a heavier burden falls on others, who are able to keep less of the money that they have earned. This Government are rightly committed to supporting businesses through low taxes—that is why corporation tax is being cut again to 17%—but those taxes do have to be paid.

This Bill therefore addresses many of the ways that companies use to avoid paying their fair level of tax. That includes the amendments that we are debating, tabled by the Government, to reform hybrid mismatches. The amendments will reduce aggressive tax planning, typically involving a multinational group. The introduction of these rules will, in essence, remove the tax advantage arising from the use of hybrid entities and instruments, and ought to encourage more businesses to adopt less complicated, more transparent cross-border investment structures. I look forward to similar rules being introduced by other jurisdictions. However, in line with OECD regulations, the Bill contains provisions for counteraction in the UK where the other country does not counteract the mismatch within its own hybrid mismatch rules. The Bill introduces the new penalty of 60% of tax due that was announced in the Budget, to be charged in all cases successfully tackled by the general anti-avoidance rule.

Government amendments 136 and 137 help to ensure that the changes announced in the Budget work as intended, cracking down further on unscrupulous and aggressive tax avoidance. I agree with the comments made by my hon. Friend the Member for Dover (Charlie Elphicke) on country-by-country reporting, as well as those raised so regularly by the right hon. Member for Don Valley (Caroline Flint). There is widespread and growing agreement that there is a need to move to country-by-country reporting so that the information is out there and available both to national tax authorities and to the wider public. That brings us back to the question of whether the best way to achieve that is for individual countries to act unilaterally or for the UK to move in partnership with our international allies and through a range of international organisations both within and beyond Europe.

[Rob Marris]

Of course, the Opposition want international action, we want international co-operation and we want our international friends to copy the amendment tabled by my right hon. Friend the Member for Don Valley (Caroline Flint), which we hope will be successful tonight. However, we also need to bear it in mind that half the tax havens in the world are British overseas territories. We have a particular responsibility in this regard worldwide. It is not about some sort of moral responsibility—to use the old-fashioned phrase, the white man’s burden—or any of that nonsense. It is to do with the fact that British overseas territories are responsible for half of these shenanigans.

[Mike Wood]

The hon. Gentleman makes a valid point, but we should also recognise, as I am sure he will, the progress that has been made in recent years to insist on those overseas territories moving into the 21st century so that their tax arrangements comply with what we would expect for international standards. In a globalised world, we must be clear that concerted international effort is needed to stop continued cross-border tax avoidance, evasion or plain old-fashioned aggressive but unscrupulous planning.

The UK Government have done more than any previous Government and more than most of our international allies and competitors to eradicate these practices, and they continue to do so, but of course more must be done and I welcome the reassurances we have heard from the Government that this remains a priority. I am pleased that the Government are now pursuing country-by-country reporting and that it will be discussed at the forthcoming G20 Finance Ministers meeting. This measure will by itself help to increase transparency across multinationals, supporting not only our tax authorities but, perhaps more importantly, those of the developing countries of which we have heard, which are almost literally being robbed of vital sources of income.

In conclusion, the Finance Bill and the amendments tabled to it include both pioneering and bold measures. It will ensure that taxes are paid and that everybody pays their fair share, and I look forward to supporting it this evening.