Tax Avoidance and Multinational Companies

Rob Marris Excerpts

Wednesday 3rd February 2016 Commons Chamber

[Roger Mullin]

I thank the hon. Gentleman for his intervention, because I must admit I was not aware that only 65 staff were involved in transfer pricing. That seems to me to be remarkably few, given the challenges they face. I would welcome anything that can be done to strengthen their numbers.

Times have changed. Back in the 1970s, it was never envisaged that huge multinational corporations could quickly arise as a result of operating in the world of the internet. The tax system, which has been built up over many years—as the hon. Member for Warrington South (David Mowat) mentioned, part of it dates from the 1920s or thereabouts—is singularly unable to deal with some of the types of international corporations, such as Facebook and Google, that there are today.

The world has changed fast in other regards. I am old enough to remember being able to go into a café and just ask for a coffee.

[Rob Marris (Wolverhampton South West) (Lab)]

Surely not!

[Roger Mullin]

I am. Nowadays, I am delighted to say that I know about cappuccinos and other things.

[Rob Marris]

In your constituency?

[Roger Mullin]

Yes, throughout my constituency. There is wonderful cappuccino in Cowdenbeath, I have to say. The likes of Starbucks were not present years ago. The internationalisation of what seem to be simple products is a comparatively new phenomenon.

We must not lose sight of the fact that many more traditional players, not merely internet companies, are engaging in practices that may be legal, but create major challenges internationally. If I were to ask in a local pub quiz, which of course I rarely go to—

[Rob Marris]

Because you’re drinking coffee!

[Roger Mullin]

Quite. If I were to ask, “What is the biggest charity in the world?”, many people would say the Gates Foundation, which The Economist has estimated is worth about $37 billion. Few would say that the answer is, as The Economist pointed out a few years ago, the Stichting INGKA Foundation—a charitable body whose aims include

“the advancement of architecture and interior design”.

This charitable foundation owns INGKA Holding, which owns the IKEA group.

That set-up, which is admittedly much more complex than I have just described, operates and moves money across territories such as the Netherlands, Luxembourg, Switzerland and so on. The money is not even tracked within that foundation. The IKEA trademark is owned by another private company, Inter IKEA Systems. Just to operate IKEA’s stores, of which there are approximately 290 in the world, the charity has to make substantial yearly payments. Eventually, the trail is thought to lead back to the owning family. When there is such complexity—and it is even more complex than I have summarised—we can see the kind of international challenge there is. That is why I believe the current tax regimes to be ill-equipped to cope and why we need fundamental reform.

Let me give a glimpse of another tactic that is used—the offshoring of companies. There are approximately 19,000 businesses registered at a single address in the Cayman Islands. That must be a pretty big hoose, as we would say in Scotland.

[Rob Marris]

Full of IKEA furniture!

[Roger Mullin]

Yes, full of IKEA furniture.

It has been claimed by Oxfam, although I have not checked this out, that 98 of the FTSE 100 companies have subsidiaries in tax havens. There is a wider ethical question to address. This is not merely about how international corporations may evade UK tax. Some countries are much more vulnerable than the UK. There are considerable concerns, as the hon. Member for Foyle (Mark Durkan) said, in the developing world. Some 30% of Africa’s wealth is held offshore. Research by the International Monetary Fund has found that developing countries lose $200 billion a year to tax avoidance—more than they get in all forms of foreign aid.

The UK needs to take a lead. Hopefully we will see that when the Prime Minister hosts the anti-corruption summit in May 2016, because the UK remains at the centre of a global network.