Finance (No. 2) Bill

Nigel Mills Excerpts

2nd reading: House of Commons
Tuesday 18th April 2017 Commons Chamber

[Jane Ellison]

On the latter point, I looked at this matter in detail recently. On what would be required of people in terms of the digital uploading of data, the vast majority of people in the country—in percentage terms, in the high 90s—have access to the right broadband speed.

As for what the change will mean for the smallest businesses, we do not recognise some of the figures that have been put in the public domain by some representative bodies. The Treasury has conducted its own analysis and published it, including the methodology behind it. We acknowledge that this will be a big change for the smallest businesses, particularly for those below the VAT threshold, which is why the Chancellor announced plans to defer for an additional year those businesses coming into the system. Given that the pilot has now started, that means that the system will be piloted for two years before some of the smaller businesses enter it.

However, we cannot sustain the current level of error and the size of the SME tax gap in the long term; we must begin to tackle those problems. A number of developed countries are increasingly digitising their tax systems, and that will have long-term benefits for business. I accept that the transition may involve challenges, but we shall try to provide support during that period.

[Nigel Mills (Amber Valley) (Con)]

I fully accept the need to tackle the tax gap, but if the advantages for the very smallest businesses are as my hon. Friend has described them, would she be willing to consider allowing such businesses to opt into the system, rather than making it compulsory for those with very low levels of turnover? Might they be allowed to see how the system works over a period of, perhaps, five years?

[Jane Ellison]

My right hon. Friend the Chancellor has already announced that businesses with a turnover below the VAT registration threshold will have an additional year, until April 2019, before digital record-keeping quarterly updates are made mandatory. I am sure that we shall debate the issue in more detail later, so I will not be drawn into it too much now. Suffice it to say that some of the alternative proposals do not tackle the level of error and the tax gap. We need to address that, because it is part of the general challenge relating to the sustainability of the tax base.

We believe that this change will benefit more than 3 million small businesses in the United Kingdom, the vast majority of which are banking online. We are going with the flow and following the direction in which society is moving. As I have said, however, a package of support will be available to the smallest businesses. We may have a chance to explore that a little further, but it will depend on how much time we have to debate the Bill over the coming days. HMRC will ensure that the needs of businesses are best met by enabling them to learn from the ongoing pilot phase, which, as I said earlier, will now be longer for the smaller businesses. We want to make sure that these much needed reforms are implemented smoothly at the operational level.

I have talked about the way in which the Bill can support the health of the next generation and about how it can help us to adapt our tax system to the modern realities of working life, but I also want to talk about how we can create a fairer, more sustainable tax base and raise much-needed revenue in the process. As I have said, the Government remain committed to their fiscal mandate of reducing the deficit. That is why, for instance, they made the difficult decision to increase the standard rate of insurance premium tax from 10% to 12% in the autumn statement, thus raising vital revenues that were required to support public services. The Chancellor set out very directly the need to raise additional revenue.

As I have made clear, the Government recognise that taxes must be fair. They should also be competitive, which is particularly important as we enter the critical next phase of the negotiations on our exit from the European Union. We need to ensure that our economy retains its competitive edge, and remains an attractive place for both business start-ups and ongoing inward investment. Some excellent decisions in that regard have been made in recent months. However, taxes need to be paid. That should go without saying, but, although ours is one of the narrowest tax gaps in the developed world, and although we are, in my view, one of the most transparent countries when it comes to the way in which we measure and report on it, we need to tackle tax avoidance at all levels to ensure that everyone—big business, small business and individuals—pays the right amount at the right time.

The Bill provides for further action to ensure that we receive the tax revenues that are due by continuing our work to tackle tax avoidance and evasion. We already have a strong track record. Since 2010, HMRC has secured about £140 billion in additional tax revenue as a result of tackling avoidance, evasion and non-compliance. The UK has also shown international leadership: it is at the forefront of many of the international discussions about tackling those issues. Indeed, some of the thorniest avoidance and evasion issues that we face, particularly where they involve complex multinational structures and businesses, can be tackled only in international forums. We have worked closely through the OECD and other international bodies and we will continue to do so and to lead the discussions to tackle those issues. This Bill will build on that work by introducing more than 10 policies that are forecast to raise over £5.5 billion by 2021-22.

First, the Government will update the rules on how companies claim tax deductions for interest expenses and losses. From this month, large businesses will no longer be able to reduce their UK taxable profits by deducting a disproportionate amount of interest expense in the UK. Nor will they be able to offset all their tax liability with past losses in years when they make substantial profits. Taken together, those measures will raise nearly £7 billion from large companies over the next five years.

Secondly, the Bill will continue the Government’s crackdown on the use of artificial disguised remuneration schemes by putting beyond doubt the existing rules and by introducing a new charge on outstanding loans from 5 April 2019. Those changes will ensure that scheme users pay their fair share of tax and will bring in £2.5 billion by 2020-21.

Thirdly, to deter those who gain financially from enabling tax avoiders, the Government will introduce a new penalty for those who enable the use of tax avoidance schemes that are later defeated by HMRC. That is an area on which we have worked closely and where policy development has benefited from a focus on quality tax policy making. We have worked closely with representative bodies to ensure that all people working within the spirit of their professional guidelines have nothing to fear from the new rules. However, it is important that we tackle the enablers.

I think we have all as constituency Members of Parliament heard from people who feel that they were given advice that was later revealed to have been poor advice. However, we have not had a system whereby we were able to pursue in the way we wanted those people who enabled the tax avoidance. That cannot be right. Therefore, the Bill will mean that enablers of abusive arrangements can be held accountable for their activities, while ensuring, as I say, that the vast majority of professionals who provide advice on genuine commercial arrangements will not be impacted. The Bill will also bring an end to a long-standing imbalance in the tax system by abolishing permanent non-dom status. That will raise £400 million each year by the end of this Parliament.

As a package, those measures will ensure that our tax system remains fundamentally fair and that people and businesses pay the taxes they owe. We have introduced them not only because it is important to sustain the tax base—that is important for the revenue we need for vital public services—but because it is important that people feel that everyone is contributing as they should be and that we are asking everyone to work within the rules. The quid pro quo for having a competitive and fair tax system is that taxes should be paid.

The Bill will help to deliver a fairer and more sustainable tax system, one fit for the digital age and responsive to the different ways in which people choose to work. It will continue our work to tackle tax avoidance and evasion. It will help to deliver improvements to the nation’s finances, to pay for critical public services and, by taking a significant step to address the issue of child obesity, to deliver a better future for our younger generation. The Bill delivers on the Government’s plan for Britain, a stronger economy and a fairer society. I commend it to the House.

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[Nigel Mills (Amber Valley) (Con)]

It is a pleasure to speak on this nice, brief and moderate Bill. I suspect the Bill that finally clears the House in the next couple of weeks will be a little thinner. I am not sure that I welcome the change to printing the Finance Bill in one block, rather than two; it feels worse.

My speech will focus on the content of the Bill rather than on trying to start the general election campaign, which does not technically begin until tomorrow, but I am sure I heard the hon. Member for Bootle (Peter Dowd) say that Labour wants tax to be a higher proportion of GDP than the Government currently have it. If that is a Labour manifesto pledge, I suspect it will appear on more leaflets for Conservative candidates than for Labour candidates. The only real way of achieving it is to raise income tax, national insurance or VAT, none of which will be popular with the electorate.

For coherence, I will address the Bill’s measures in order. First, there is a moderate measure that will allow employers to offer their employees up to £500 of pensions advice, and associated advice such as the impact on tax bills, tax-free. Where there are problems with people’s understanding of how the pensions system works, of how much they will have in their retirement and of how much they need to save and how they should save it, any effort we can make to encourage them to take more advice, and get good advice—the earlier, the better—has to be right. I welcome increasing the tax relief from £150 to £500.

Clause 31 addresses interest restrictions for corporates, which will be allowed to claim tax relief on interest only up to 30% of their earnings before interest, taxes, depreciation and amortisation. Before coming to this place, I spent many years advising large corporates on their corporation tax bills. I wrestled with the many efforts that have been taken to get the allowed interest deduction down to a sensible level. There are well over half a dozen different anti-avoidance measures, such as allowable purposes, thin capitalisation rules and the worldwide debt cap. We have had all manner of attempts to get to the right answer, but successive Governments—Conservative, Labour and coalition—saw it as a competitive advantage for the UK to try to attract inward investment from holding companies by having a generous interest deduction.

It is right to recognise that, in an era when large multinational corporations have been gaming the global tax system to a ridiculous degree, we cannot allow our system to be exploited by excessive interest deductions, especially where they are not real commercial interest costs to the worldwide group. It makes sense for us to get in line with the global consensus that the interest limit should be 30% of EBITDA. The House should approve the measure to provide some scrutiny of the downside impact of how we attract international investment.

How many businesses that employ large numbers of high-skilled people are here for the interest deduction that we effectively allow on profits earned across the world? What impact will that have on where those businesses choose to locate in future? I hope the impact is zero and that, because we are such a great place to do business and employ people, businesses do not come here to chase generous tax deductions, but it will be interesting to see the impact of this policy change.

The rules are complicated, and there are some sensible exemptions for infrastructure investment. We need to encourage private companies to invest in UK infrastructure, and our regime is not all that generous—we do not give tax relief for large amounts of industrial building, which can have a large infrastructure cost. We should reform those rules, too, to make sure that we have a competitive regime so that, if a multinational company is looking to invest in infrastructure, the UK is the place to do it, not somewhere else for tax purposes.

I welcome the deemed domicile rules that the Minister outlined. People out there who try to understand tax cannot understand why rich people can avoid tax because of where their father was born. We have had that strange historical system since the colonial days. It should be absolutely clear that people who are born here should pay all their taxes here, and people who have lived here for a long time should be paying the same taxes. The idea that a person can move and live here for 40 years, or even be born here, and avoid certain taxes is a ridiculous way of exploiting our tax regime, and I welcome the steps to change that.

Clause 71 introduces the soft drinks levy, about which I have raised concerns in previous debates. I welcome taxes on unhealthy activities, and we have lots of taxes on alcohol and tobacco for sensible reasons. We have an obesity crisis, and it is perfectly right to consider taxes on unhealthy foods and drinks. A sugar tax makes sense, but when a consumer sees a product they want to buy in a supermarket they should be able to see something that says, “This product is so unhealthy for you that it is taxed, so you will pay more for it.” That is how to get behavioural change. Someone walking down the aisles of a major supermarket should think, “A can of full-sugar cola is 10p dearer than Diet Coke because it is unhealthy, so I will buy the Diet Coke.” That should also apply to ridiculously sized portions of cake, to sweets that are very bad for you and to all those other unhealthy things that we eat. We should try to structure a sales tax on unhealthy products to get the behavioural change we want.

There are many reasons why the Government have chosen to go down the route of targeting a particular product, but there is a real danger that the market for cola is so complicated that the consumer might not know that the charge even exists. I happened to be in a supermarket over the weekend looking at the varying prices of cola. I am quoting Tesco because it is my nearest supermarket—I should declare an interest because my wife works there—and I can buy a 2-litre bottle of Tesco own-brand cola for 55p, a 2-litre bottle of Pepsi for £1.25 or a 2-litre bottle of Coke for £1.66, or two for £2.50. We are adding 18p a litre, so how a consumer will know from the varying prices, never mind all the promotions, which of those colas is the bad one and which one they should be avoiding is not entirely clear. Looking at the prices for smaller quantities, a 600-mililitre bottle of Pepsi is 99p, which is about the same as a 2-litre bottle.

[Michael Tomlinson (Mid Dorset and North Poole) (Con)]

My hon. Friend is making a cogent argument, but does he not welcome the targeted nature of the fund? The levy will go to the Department for Education to help all our children in all our constituencies to have healthier lifestyles. Does he welcome that, even if he has concerns about other aspects?

[Nigel Mills]

I welcome more funding to help children to be healthy and more funding for sports. I especially welcome the fact that the largest employer in my constituency, Thorntons, as part of the Ferrero group, gives big funding to school sports. More funding for healthy activities for children has to be a good thing. I am a little nervous about hypothecating taxes for individual spending, because there is a real risk that it would lead to a complicated tax system. It is a little like giving with one hand and taking away with the other. I welcome the fact that we are raising such spending, although I would not want to link it directly to a tax.

[Jane Ellison]

Just to clarify, one reason why the levy is on producers is that we want to drive the reformulation of products. Drawing on my previous role as public health Minister, every study that has ever been done across the world has shown that reformulating products at source is probably the most effective way of helping people to tackle obesity. I have spoken to supermarkets and producers for many months and, in their own research, they are getting the message back from consumers that tackling the problem at source through reformulation is what people want to see.

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[Nigel Mills]

I agree that changing what people consume without their knowing it, and without their having to change their own behaviour, will get the calorie reductions that we want. If that is the argument, I am intrigued about why we are going for the soft drinks industry, which has produced diet brands that use no sugar and contain no calories, and has innovated with things such as Coca-Cola Life that have reduced calories and reduced sugar content by using different sugars. There is a risk that industries that have spent lots of money developing popular products and marketing them will think, “We do all that investment and are still getting clobbered by a levy, whereas other industries that do not do that investment do not have a levy. Perhaps we should not invest and run the risk.”

We can debate this at length, but what we are trying to do is right. The childhood obesity crisis is such that we have to take some measures. I accept that this measure targets something that contributes to that crisis, but as we develop this policy I would like us to have a clear thing that consumers can see in the shop which says, “This is unhealthy, so it will cost you more.” That would be a better way of getting the behavioural change and the change in diets we need, and it is likely to be more effective in the long run.

[Kirsty Blackman]

I appreciate the point the hon. Gentleman is making and I have a lot of sympathy with his wider point about reducing the consumption of sugary food. His point about making it obvious to people what they are consuming is interesting, and that could be done more widely, in relation not just to soft drinks, but to things such as pasta sauces, which contain a huge amount of sugar but where there is a lack of awareness. One of the biggest things we can do to change behaviour is increase awareness, rather than increasing the cost on all these things.

[Nigel Mills]

I agree with the hon. Lady about that. The products we should probably be targeting are those people think might be healthy but are not. I may buy a smoothie thinking that it contains lots of fruit so it must be good for me, but it, too, is high in calories. It is not a bad thing to consume that fruit; I need to have it as part of a balanced diet. Certain milk drinks are incredibly bad for people and may be worse than many soft drinks, but I am not entirely clear that the levy applies to those. If we had structured a tax that went on something high in sugar or high in calories, that may have been a way of getting to the outcome we were after.

[Lucy Frazer]

Does my hon. Friend accept that the provisions will give rise to a public debate, and therefore to public awareness of sugar in drinks? Some people may not have been aware of that before, but they will know about it now.

[Nigel Mills]

Having a broader debate to raise people’s understanding that a diet cola is much healthier that a full-sugar cola for most people is helpful. I am not sure how much of an impact debates in this place or taxes on producers will have on people’s consumer decisions when they are in the supermarket, as those are probably based on price, promotion and their personal preferences or historical buying habits. However, the Government are right to tackle this issue.

Clause 108 seeks to tighten up the rules on VAT collection from fulfilment businesses. Globalisation has changed how businesses are structured so that people buy from them online. People then avoid paying VAT due in the UK, which is a big weakness. We have a generous turnover threshold. Most countries in Europe do not let people have their first £80,000 of turnover VAT-free—I believe the figure is now £83,000. It is right that we have that exemption, but we need to find ways of stopping people selling things on internet marketplaces and exploiting it, because there is a big revenue leak. This also makes it very hard for UK businesses resident here that are trying to comply with the rules to compete with those internet-based sales where people are not charging VAT on products on which they ought to be charging it. All the measures we can take to ensure that anyone trading here who turns over more than £80,000 has to charge VAT on the things they sell have to be right, and I look forward to seeing how those measures work and what more the Government can do on them.

Clause 120 deals with making tax digital, on which the Minister and I had an exchange earlier. I accept that we have to make tax more digital than it is and we have to get everybody filing returns online. I can see why the Government would want the information much earlier than they are getting it and would seek to remove the errors. Individuals and businesses do not want to make errors and they want to get their tax right. I am not sure how much we help them when we add 762 pages of Finance Bill every year and they have to try to work out how to comply with them. Making tax digital is the right thing to try to do, but I worry that if we rush the smallest businesses into it we will end up with the wrong outcome. I accept that businesses turning over more than £80,000 are probably already filing their VAT quarterly, doing monthly PAYE activities, presumably on a computer, and reporting those, and doing the same thing for auto-enrolment. Those businesses are probably already gathering, just about in the right format, all the information they need, and making these returns should not be unduly onerous for them. In that area, the advantages outweigh the downsides. However, I do worry about ending up with a perverse outcome.

[Mr Rees-Mogg]

My hon. Friend is slightly glossing over the problems for businesses. Many of them will be paying accountants to make the filings that they are already making and this will be a further cost to them, which will bear down particularly heavily on smaller businesses.

[Nigel Mills]

Yes, and I was coming to that point about the smaller businesses. I suspect that businesses that are submitting VAT returns have already gathered all their sales data and invoice data, and will have to gather all their payroll data for their PAYE reports, and so most of the stuff they need to do this reporting has already been gathered and looked at coherently. Small businesses may do that only once a year and employ an accountant to do it, so we run the real risk of going from having an annual return prepared by a qualified person who has looked through the information and made it coherent and accurate to having a quarterly statement that the individual tries to do themselves, ending up with much less accurate information being prepared than before. We need to be careful to avoid going from a relatively reliable annual return to an unreliable four-times-a-year situation and unintentionally increasing the errors that HMRC has to look at. Instead of doing this once a year and making sure they have got it right, the risk is that people may choose not to pay an accountant or be unable to afford an accountant to do this four times a year. So there is some merit in thinking about how we phase in this measure for the smallest businesses. We could make the compulsory date a few years further away and encourage people to choose to opt in if they feel they can comply. In that way they would gain advantages from knowing that their tax bill is right and will not be shocked when they get the statement back from HMRC. There are some advantages here, so if we sell this right, businesses will choose to sign up to it and the final compulsion after a few extra years will perhaps not be as big a shock.

[Sammy Wilson]

Does the hon. Gentleman acknowledge that this may be meant to do away with errors and give businesses an idea of what their tax payments are going to be, but there are end-of-year adjustments—those relating to stock, work in progress, depreciation and so on—which will have an impact on a firm’s tax business? If these things have to be done once a quarter, it adds significantly to the work businesses have to do and therefore to their costs.

[Nigel Mills]

I agree with the hon. Gentleman that we have to think about how to do the annual adjustments—they have to be made only once—if we move to a quarterly system. A lot of very small businesses are already on simplified accounting methods in any case, so perhaps those issues will not apply to that extent. The Minister reminded me that the Government have been trying to expand on those simplified accounting measures to make things easier for small businesses, and so I hope that some of those issues would not arise.

During the debate on my first Finance Bill as a Member of this House, one of my amendments sought to suggest that we move the corporation tax system much closer to the annual accounts that people submit, rather than having lots of different tax adjustments. Such an approach would be much clearer for business and would create big cost savings. With more of these things, perhaps I will eventually get to that dream I had nearly seven years ago, although I am not entirely optimistic about that. To be fair, we should welcome the fact that the Government have relaxed the timetable for businesses whose turnover is less than the VAT threshold. I welcome that and it has been largely welcomed by most small businesses in my constituency, which did have concerns about this.

As we are dealing with corporation tax and as I was talking about amendments I tabled to the first Finance Bill on which I served, let me say that one of my other amendments sought to allow groups to file one corporation tax return for their whole group, rather than having to file one for every individual entity and then making loads of complicated claims about how losses are moved around the group. This Bill contains restrictions on how many of the losses brought forward from previous years can be used, but we are allowing those losses now to be used right across the group, rather than just in the entity that originally made the loss. That is a welcome change.

As we leave the EU and can finally lay to bed all the worries we had about whether we would have to include all EU companies in a group tax return, if we had one, because it would be discriminatory under EU law to include only UK companies, perhaps now is the time to look, as many other countries have, into allowing groups of companies to file one tax return that shows the profit for the whole group and does not have to track every individual transaction between all the companies. That would help us to tackle some tax avoidance schemes that have played on the different treatment of transactions between companies. It would make it easier to comply and help to tackle avoidance so, as we move through the Brexit process, I hope we can look at those issues that we have previously found difficult.

[Suella Fernandes (Fareham) (Con)]

Does my hon. Friend agree that the cut in corporation tax from 19% to 17% in 2020 is only going to be good for the economy—the previous cut produced an increase in revenue from corporation tax—and will set Britain out as a favourable place for business and investment as we enter the next phase of our history through Brexit?

[Nigel Mills]

I absolutely agree: it is important that we continue to send the signal that Britain is a great place to do business and to invest. We want as much international investment here as we can get, so it is absolutely right to have a headline corporation tax rate that is as low as we can have it. I welcome the fact that we are going to get it down to 17%. The previous Chancellor hinted that he might have used 15% to give a sense of direction; perhaps the Government will look into using that in the manifesto we are about to produce.

[George Kerevan]

Can the hon. Gentleman explain why Germany, which has a much higher headline rate of corporation tax, does so much better industrially?

[Nigel Mills]

I think I would have had to attend several of the hon. Gentleman’s lectures to understand better how the German economy works, but that is not something I have ever studied. We could probably talk about euro rates and the history of investment in skills and so on, but I suspect it is not all down to corporation tax.

[Kevin Foster (Torbay) (Con)]

In his consideration, will my hon. Friend, like me, bear in mind the fact that the closest and most comparable jurisdiction in the European Union is Ireland, where the headline rate is around 12.5%?

[Nigel Mills]

Yes, and Ireland has found that that corporation tax rate has been successful in helping to attract investment. I noticed that throughout all Ireland’s financial crises and its desperate need for tax revenue, that rate was one thing on which it was not prepared to move, which is a sign of how successful it thinks it has been.

[Mr Alan Mak (Havant) (Con)]

I hope my hon. Friend will join me in sharing the sentiments of our hon. Friend the Member for Fareham (Suella Fernandes) and celebrate the fact that Britain will have the lowest rate of corporation tax in the G20. To come back to the point made by the hon. Member for East Lothian (George Kerevan) comparing Britain to the German economy, does my hon. Friend agree that although the British and German Governments spend a similar amount on research and development—around 28%—the big deficit is actually in private sector investment? If we are going to lead the fourth industrial revolution, which will be important to ensuring that our economy is strong, we need to get the private sector to invest. That is what the Bill will do.

[Nigel Mills]

I agree with those sentiments. If we are going to get into a debate about the German economic model, though, I should probably step out of the middle of it because it is not an area I have ever looked at.

There is a clause in the Bill on the Northern Ireland corporation tax and how we will make the lower rate there work. This is probably my chance to sneak in a remark, Mr Deputy Speaker: I hope we can get an Executive formed in Northern Ireland so that they can take the decision to have a lower rate of corporation tax. I suspect we probably do not need to rush that clause through the wrap-up, given the current situation, although I guess it is not controversial in Northern Ireland.

[Sammy Wilson]

Does the hon. Gentleman accept that there will be great disappointment in Northern Ireland that because of Sinn Féin’s insistence on unrealistic demands, there will not be an Executive in the near future, meaning that Northern Ireland’s ability to reduce corporation tax, which was a key part of the economic strategy, will be removed from the Executive?

[Nigel Mills]

I do agree: it is regrettable that the inability to form an Executive means that it looks like a power that was long campaigned for will not be used on the timetable it should be. We have seen how important it is for the Northern Ireland economy to have a rate that matches that of the Republic of Ireland so that it can compete on attracting investment. Many issues will get lost in the upcoming general election, but I hope that the need for Northern Ireland to find a way forward is not one that we take our attention off for the next six or seven weeks.

I think it was to last year’s Finance Bill that the Government accepted an amendment to introduce territory-by-territory reporting for all large corporates as part of their annual tax strategy. When the Minister sums up, will she update the House on the timetable? When might that power be turned on so that we can start to see those reports?

I welcome the measures in the Bill to encourage social investment by increasing tax relief but making sure that it is focused on the right things and is not subject to avoidance. I recently heard that a group of residents in Holbrook had managed to raise the funds to buy a local pub that faced being knocked down and turned into housing, by getting 250 or so people to buy shares in the new business. That is a real example of what a community can do to save a valued asset and I pay tribute to their success.

I wish to touch briefly on air passenger duty. I do not want to revisit the whole debate—I accept that we need it to raise revenue—but I just wonder whether, as we leave the European Union and some of the restrictions on how we can regionalise taxes drop away, the Government will be prepared to look at measures to encourage new routes into regional airports. That would help to tackle the congestion and air quality in London, and it would help the economy outside London by providing direct routes to the high-growth parts of the world. I wonder whether it is possible to produce a scheme in which we have either lower rates of APD on routes into regional airports, including East Midlands airport near my constituency, or lower APD for a new route for a certain time period—perhaps three or five years—to enable such a route to become viable. Such measures would not have the big revenue hit that they would have on all the London airports, and would target the money that we can spend on getting the vital regional growth that would help the regions of England outside London. As APD is a devolved tax, if Scotland chooses to have a lower APD rate in future, we may see some interesting tax competition if airports in the north of England feel the need to respond.

Overall, I welcome the Bill. It contains many important measures that will help to protect our tax base and tackle avoidance—which we all want—and help the economy to grow. It is an important Bill and I hope its provisions will survive the discussions over the next few days.

[Sammy Wilson]

The hon. Gentleman quite rightly mentions tax avoidance. Does he accept that although there are measures in the Bill on tax avoidance, given that the tax gap is nearly £40 billion but the Government’s target is to collect £5 billion more between now and 2020, the issue is not being taken seriously? There will be frustration that rich companies will still be able to walk away with very low tax bills.

[Nigel Mills]

I was nearly finished, but the hon. Gentleman invites me into a debate on the tax gap. I do not have the numbers to hand, but it is important to understand what makes up the tax gap. Tax avoidance by large corporates is actually a relatively small part of it. From memory, the largest part is due to people who operate in the black market and do not pay VAT or declare their tax. Another large part is down to errors or mistakes by small businesses or individuals. It is right that the Government should bear down on all those aspects, but I do not think it is possible to get the tax gap down to zero—it would involve some kind of ridiculously heavy compliance burden. We could probably get there only by having zero tax rates or zero economic activity, so there will always be some level of tax that we cannot collect, but the measures that the Government have taken progressively over the past seven years to tackle aggressive tax avoidance have been the right ones. We have the general anti-abuse rule, which we are trying to tighten up in the Bill. When that gets to its five-year anniversary, I look forward to seeing whether we can change our strategy on targeted abuse rules, whether we might not need to have quite so many individual anti-avoidance rules, and whether we can rely on the general one.

Although we have discussed Making Tax Digital, a key part of reducing the tax gap is making businesses report and be more compliant on a more regular basis. We must press on with that and make it work, but we do not want to risk going too far. There are more measures that we could try to take to encourage people not to pay cash in hand to avoid paying VAT. It is very hard for an individual to know whether the person cutting their hedge or driving their taxi is tax registered. Perhaps we should have some kind of registration process so that a person can say, “I want to engage people who are fully tax compliant. If you can show me that you are, I will happily hire you. If you can’t, perhaps I will hire someone else.”

[Mr Mak]

My hon. Friend is making a very good speech about the changing nature of the economy, particularly in relation to the rise of the gig economy. Will he join me in welcoming the review by Matthew Taylor about how we can tax both the individuals and the companies operating in the gig economy to make sure that we strike that fair balance between taxation and innovation in our economy and our employment market?

[Nigel Mills]

Yes, I happily welcome that review. That has become an emerging issue that we need to tackle. It will probably blow up in the national insurance debate. I welcome the measures in this Bill, which propose that where the public sector engages with individuals who try to incorporate themselves, those individuals will not get the tax advantages. That has to be right. We need to find a way of doing that for very high paid individuals outside the public sector who try to do that. We need to ensure that they are taxed on that income in a way that the tax system intends, and not allow them to get an advantage through the corporation tax system. I accept that the reduction in the dividend relief that was announced in the Budget was the right thing to do. As we see our employment market changing, we need to ensure that the tax system is not encouraging unscrupulous employers to try to pretend that their employees are self-employed in order to get a tax advantage for themselves, leaving those individuals in a far worse situation without the security of being employed and without the rights to welfare, holiday, sick and maternity pay to which they are entitled. That review will be very important in enabling us to strike the right balance and to encourage people who are genuinely self-employed and taking risks. I accept that we should have a lower tax rate for people who do that. How we get our tax rules to match the changing way that people work will be extremely important, and that review will have an essential role to play.

I will wrap up my contribution by saying that I welcome this Bill and that, whatever passage it has, I wish it well.