United Kingdom Corporate and Individual Tax and Financial Transparency Bill

Philip Davies Excerpts

Friday 6th September 2013 Commons Chamber

[Jacob Rees-Mogg]

The Government had a fiscal tightening and a plan for increasing taxation—which has come through—that forecast taxation going up to over 38% of GDP. Taxation at 38% of GDP is about the highest level that Governments ever achieve. If we go back to Harold Wilson’s prime ministership, we still find that it is almost impossible to get taxation at much more than 38% of GDP. The issue was that spending was so high, not that taxation was too low. The ability to squeeze imaginary rich people to get a lot of money coming in was simply not there. Such fiscal tightening on the taxation side as was possible was undertaken by the Government, but had they gone as far as the right hon. Gentleman proposes, any prospect of economic recovery would have been postponed. The tightening would have been too great, which would have harmed the economy. It would have taken money out of the economy simply to put it into the Government’s coffers. That would have led to a shrinkage of the economy, not least because people would have changed their affairs so as not to pay that extra burden of taxation.

[Philip Davies]

Did not that intervention from the right hon. Member for Oldham West and Royton (Mr Meacher) go to the heart of the difference between his views and ours? His view was that the Government would create all those jobs, whereas it is our view that the private sector companies that he so hates will create those jobs for the economy.

[Jacob Rees-Mogg]

My hon. Friend is absolutely right. It is certainly my view—I accept that it is not the view of the right hon. Member for Oldham West and Royton—that it is the private sector that creates employment. Every job in the public sector has to be paid for by the taxes of the private sector. The public sector has no ability to create jobs without imposing a burden of taxation either now or in the future. I shall not go into the details of Ricardian equivalence, but the electorate understand that extra spending that is borrowed is merely taxation postponed.

--- Later in debate ---

[Jacob Rees-Mogg]

I am very glad that my hon. Friend has put it in that way. Sometimes, the Government claim that they have created 1.3 million private sector jobs, and that is a turn of phrase that I particularly dislike. It is not the Government who have done it; it is the private sector.

I am particularly enjoying discussing the right hon. Gentleman’s Bill. It is sometimes alleged that politics has all become too similar and that all the parties agree. That might be true of those on our Front Benches, but there are still some of us on the Back Benches who are willing to put forward in a more forthright way the views that we hold according to our respective political traditions. That certainly makes the debate in the Chamber more interesting.

Having set out my broad-brush objection in principle to what the right hon. Gentleman has proposed, I want to move on to the details of the Bill. And here it gets worse. The Bill is an astonishing, fundamental attack on some of the basic principles that we ought to enjoy. As a taxpayer—I am sad to say that I am not in the top 250, although I would not mind if I were—I have a right to privacy. The Government do not have a right to publish my financial information; that is my private, confidential affair. I am not advocating tax evasion, which is a criminal activity. It is quite right that it should be criminal, and the Government should enforce those laws. However, the prevention of that crime does not require the Government to deny people their fundamental right to privacy.

People’s most personal and intimate financial details, as set out in their tax return, should not be made available to all and sundry, and it is quite right that the tax authorities should maintain vigorous rules of confidentiality, even when appearing before Select Committees of the House of Commons. It is a right that we all enjoy as British subjects that our financial affairs are a private matter. Yes, we have to pay a degree of taxation and, yes, we have to make declarations to the Revenue, but we do so on the understanding that they will be kept confidential. Once this begins with the top 250, the next stage will be the top 1,000 and it will develop further so that nobody has the right to maintain privacy of their own financial affairs. I thus oppose this provision very strongly.

I oppose less strongly the requirements for disclosure by public companies because they have exchanged a right to privacy in return for limited liability, so they are expected to make disclosure and are obliged to do so to their shareholders. Clause 1 deals with “Disclosure of financial information by large companies” and from the perspective of a shareholder as an investor, I believe that I am entitled to such information anyway; and with large public companies, the shareholder list is so extensive that, once that information is given to shareholders, it is effectively in the public domain.

I add at this point that my background and career have been in investment management, so I know that the more information we get from listed companies, the easier it is to do the job of an investment manager and the better the investments it is possible to make. Perhaps inadvertently, then, the right hon. Gentleman will help the investment community in that, if clause 1 were introduced, financial analysts in the City of London would practically be dancing with joy at their ability to find out every single financial statement of large private companies. It might be quite helpful in stopping them from hiding unwelcome, loss-making subsidiaries somewhere at the bottom of the balance sheet, tucking them away under a contingent liability. Because this is essentially dealing with already public companies, I would make no objection to the clause, but I would maintain the privacy of individuals—and of trusts.

I do not think that trusts should be attacked in this way. Trusts are, in fact, one of the glories of the British legal system. They are much less understood on the continent, but they allow many protections to be built into ownership. Trusts allow the protection of minors in how they are structured and they allow continuity in the holding of assets, including allowing some of this country’s great historic treasures to be kept within the country through the trust structure of ownership. Putting unduly onerous charges on them and requirements to report would, I think, be unreasonable.

Looking at the detail, the idea is that, if trusts do not meet the requirements, their income should go to the Crown. That is what happened in the Court of Wards in the 17th century. It was one of the things that caused such trouble between Parliament and the King because the Crown was able to take the estates of minors and effectively ruin them during the minority of the beneficiary. We moved away from that type of arbitrary rule of giving power to the Crown—in this context, it is not a personal Crown; the Crown is the Executive—to do things such as take funds from private property, not in the form of tax, but in a regulatory way, squeezing income for a certain period until onerous requirements are met.

I think that would be an extraordinarily unsatisfactory way of proceeding. It would undermine the right of property—again a fundamental right that we ought to enjoy. Going back to the Magna Carta, the Crown cannot take property away from people unless there is a judgment—a judgment in a court—against them; it cannot be done on the basis of some failure to meet some bureaucratic standard. This seems to me to illustrate where the Conservative, a believer in the rights of property and a believer in the individual, stands up against the socialist, a believer in the collective and the rights of the collective to override the rights of property. I stand four-square in favour of the rights of property and four-square, too, in favour of the rights of the Crown dependencies, by and large, to regulate their own affairs.

The Bill is again onerous in what it requires to be done, by Order in Council, for territories that, by and large, are no longer treated as mere colonies. The Crown dependencies are allowed to develop and run their own affairs and have their own elective councils to take charge of those affairs. The Bill is a throwback to how this country behaved in the 19th century when we felt we had a greater right to order about the non-dominions—with dominions starting, first with Canada, in the latter part of the 19th century. We seem to be taking the Crown dependencies back to a period before dominion status started to be granted. I consider that to be undemocratic, and unfair on them. It attacks their fundamental livelihoods, namely, their ability to provide financial services and a degree of confidentiality at the same time.

There is a fundamental disagreement—and I am not entirely of the Government’s view either—about the attempt to elide tax avoidance and tax evasion. It is very important to be clear about the difference between the two. Tax evasion is criminal, illegal deliberate breaking of the tax law; tax avoidance is following the law as it is written. It seems to me that, when people are being accused of avoiding tax, it is the job of Parliament to pass good laws that make that avoidance difficult, and to make the tax collectible by Act of Parliament, rather than turning the position the other way round and saying “We are not very good at writing tax law, and therefore we will make you disclose absolutely everything so that, ex post facto, we can determine how much tax we think you ought to have paid.” That strikes me as fundamentally unjust.

It has been a solid principle of British law for decades formally, but for centuries effectively, that the individual taxpayer does not have to arrange his affairs so as to increase the amount of tax that the Revenue is entitled to take. It is an important part of justice that the law should be clear, and should be enforced fairly.

[Philip Davies (Shipley) (Con)]

I entirely agree with my hon. Friend. It seems bizarre that people should be criticised for following the law of the land.

The Government have introduced a new concept, that of “aggressive tax avoidance”. Given my hon. Friend’s expertise, I wonder whether he can explain to us the difference between tax avoidance and aggressive tax avoidance.

[Jacob Rees-Mogg]

My understanding of aggressive tax avoidance is that it is, in fact, tax evasion when the Revenue has not yet got around to taking action. One of the schemes reported in the newspapers involved some comedian whose name escapes me: he is modern, and apparently very funny if you like that sort of thing. What he was doing struck me as evasion, not avoidance, although that was not directly his fault. It seemed to me that the scheme was so far removed from any sensible understanding of the tax law that “aggressive tax avoidance” was essentially a euphemism for “We will try to scrape things back rather than charging people.” I should prefer to see Her Majesty’s Revenue and Customs using the law as it is, and testing the law in the courts to establish whether such activity really is evasion. If it proves to be evasion, people should be punished accordingly, and if it proves to be avoidance, it should be considered legitimate.

I do not think it is possible to say that there is the law, there is the non-law, and somewhere in between there is something that the Government would quite like us to do. There are an awful lot of things that the Government would quite like us to do. At one point, they wanted us all to eat five vegetables a day. Indeed, they probably still want us to eat five vegetables a day, but that cannot be law. It is wrong to try to say that good behaviour, generosity and charity should be a matter of law. That is a different concept. The law, with all the might and power and sanction behind it, is a more absolute thing than that.