Finance (No. 2) Bill

Nigel Mills Excerpts

Monday 11th April 2016 Commons Chamber

[Mr Gauke]

Simplification does matter. One of the measures announced in the Budget—it is not in the Bill, for reasons that will become apparent—is the abolition of class 2 national insurance contributions. National insurance contributions are not covered in Finance Bills, but that is an example of a tax being removed—a tax that created a considerable administrative burden for both taxpayers and Her Majesty’s Revenue and Customs.

The Bill also puts the Office of Tax Simplification on a statutory footing. In the last Parliament, the OTS made approximately 400 recommendations, almost half of which have been implemented. The OTS is being strengthened; it has a new chair, Angela Knight, who is already performing a valuable role in leading the debate, and its resources have been increased. I am sure my hon. Friend will follow the OTS’s progress closely, scrutinise its performance and decide whether it is proposing measures that take us in the direction of which he approves.

[Nigel Mills (Amber Valley) (Con)]

Would my hon. Friend welcome the OTS looking at some more fundamental tax simplification measures such as wholesale reform of individual taxation, rather than focusing on small, individual parts of taxes, as a way of moving us to a much simpler tax system more quickly?

[Mr Gauke]

My hon. Friend makes an important point. There is considerable value in the OTS looking at specific areas, but I think there is a case for it looking at broader matters. Indeed, in its reviews—of small business taxation, for example—it is addressing some of those bigger questions.

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[Nigel Mills (Amber Valley) (Con)]

I am grateful to be called so early in the debate. I strongly support the Bill, which will encourage saving, reward work, encourage business investment and tackle aggressive tax avoidance. Those things are exactly what we want to see in a Finance Bill and they are all in this one.

Given that, I cannot understand why anyone would choose to vote against the whole Bill. It seems to be largely because of the changes to capital gains tax and corporation tax. I will go back as far as Gordon Brown’s first Budget after becoming Chancellor, in which he effectively introduced a 10% capital gains tax rate and reduced the corporation tax rate. Perhaps we can remember when we had a Labour Government who at least tried, in the early years, to be friendly to business and encourage investment and growth in this country.

[George Kerevan]

Will the hon. Gentleman explain why the present Chancellor raised capital gains tax to 28%?

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[Nigel Mills]

That was a peril of coalition and a Lib Dem insistence that I am sure we regret strongly, as it appears not to have increased capital gains tax revenues in the way that was intended. It is quite right to move the rate back down to a more sensible level in the responsible way that that has been done.

We should note that every year we have a Finance Bill, and they are quite long, thick and heavy. We keep adding a load of new and complex clauses to our tax system, which is still just behind the Indian one for complexity. I do not think that we have a record length Finance Bill this year, although the Government achieved that twice in the previous Parliament. At some stage, we have to find a way of getting off the merry-go-round of further complicating our tax system every year. We even have a new record now—of adding a new tax every year. We had the diverted profits tax last year; this year, we have the apprenticeship levy, which the Bill recognises is actually a tax. Although those two measures are welcome, we are further adding to the complexity that people have to deal with.

A welcome step in the right direction is that we are making the Office of Tax Simplification a permanent feature of this arena. However, we need to free that office up to do more long-term, high-level strategic work rather than having to focus on what can at times be quite small features of the tax system, which do not affect all that many taxpayers. As the Minister said, it has done good work on small business taxation, but we really need the office to work out how we can simplify the big taxes we have, to make them easier to comply with, make it easier for HMRC to enforce compliance, and make those taxes less burdensome. That was my reasoning, in the previous Parliament, for why we should make the corporation tax system follow accounts, and focus the resources we have on transfer pricing and abusive avoidance arrangements, rather than having to inquire into whether a certain item was capital or revenue, or whether a certain entertainment allowance was right.

Such long-term strategic directions to simplify the system would bring in far more revenue and make the system far more attractive. I hope that the Bill will allow the OTS to choose its own work in some situations. Perhaps it will be encouraged to consider some fundamental simplifications, and not just suggestions made by the Chancellor from time to time.

On individual measures in the Bill that are welcome, the savings and dividends nil rates are an encouragement for people to save, and a welcome simplification of the tax system for many people who struggled to work out how the dividend credit worked and what tax rate they were paying. That moves us in the right direction regarding how we stop people incorporating themselves to get a tax advantage that is not intended by paying themselves dividends, and helps us to get to a fairer system in which people who are employed pay the right taxes.

Some issues have not been raised. For example, the peer-to-peer lending rules are leading the world in encouraging the financing of businesses that cannot get normal financing from banks. There are also welcome anti-avoidance rules such as the withholding tax changes to try to stop treaties being abused so that companies avoid paying the withholding tax they should be paying in paying fees to tax havens.

The Bill does not contain some measures that I would like to be included. For example, we must accept that there is a widespread lack of confidence among the public that our largest corporates are paying all the taxes in this country that they are supposed to pay. I suspect that most of those companies are paying their taxes and that a relatively small proportion are engaging in aggressive avoidance, but everyone gets tarred by the same brush. The measures that we have introduced in the past five or six years to tweak things or introduce new rules and so on, are not tackling the fundamental lack of confidence in the system, which is why we need more transparency from large companies.

We should make large companies publish their tax returns so that we can see a calculation of how they have got from the profit they report to the tax they pay. We should know which companies have made aggressive calculations, or used strange reliefs or funny payments that we do not understand, and which are paying the right amount and happen to have losses brought forward or capital allowances that they have not used. That would boost people’s confidence and we would not see stories every few months about another large multinational that has done something that it should not have done, or done something entirely reasonable, but we do not know because such details are not in the public domain. It would help to move this debate forward if those large companies were more transparent.

Companies have to disclose many things about their directors, investment strategies and business practices, and I do not think that a little more transparency about tax affairs would put much more commercially sensitive material into the public domain. Instead, it would boost people’s confidence. I hope that large companies that are complying with the rules would want to do that—they should not be scared of doing so. If they are using existing rules and incentives for the use that they were intended, that is welcome and something that we all understand. Perhaps the one thing that we can do domestically would be to take this debate forward so that we are confident that our largest companies are doing what we want them to do, and not doing things that they ought not to be doing. With that plea, I welcome the Bill and will be voting for it this evening.