Finance (No. 2) Bill

Debate between Sammy Wilson and Nigel Mills

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

[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.

--- Later in debate ---

[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.”

Northern Ireland (Stormont Agreement and Implementation Plan) Bill

Debate between Sammy Wilson and Nigel Mills

Thursday 10th March 2016 Commons Chamber

[Nigel Mills]

I will make a couple of brief remarks. I think the whole Committee wholeheartedly supports any effort to tackle paramilitarism. I think we would all agree that anyone who engages in or supports paramilitarism has no place in a democratic assembly, making and enforcing laws. I absolutely agree that all the sentiments in the oaths make sense.

Where I get a little concerned is when we start talking about investigating and sanctioning breaches. We must be careful about exactly what some of these words could involve. What we have in these undertakings are not entirely pledges not to do things. They are pledges to do things, so we get phrases such as,

“to challenge all paramilitary activity and associated criminality”.

I could be accused of breaching that undertaking because I have not sufficiently challenged something. What does challenge mean? Does it mean that I should verbally dispute the validity of something? Should I say that paramilitary activity is heinous and I have therefore met that pledge, or should I be out on the streets of Belfast, physically challenging that activity where I see it?

Equally, MLAs will undertake,

“to challenge paramilitary attempts to control communities”

and

“to work collectively with other members of the Assembly”.

I am not sure how we can have a sensible situation where someone is investigated because they have not quite worked collectively enough with other Members on something. Would that happen because they had been working independently, not collectively, and therefore that would not count, or because they had been working a bit collectively but not collectively enough? I am not sure how we go from an oath that sets out undertakings and beliefs to something that we could try to investigate and enforce.

The Oath we take in this place is to be loyal to Her Majesty the Queen and her successors, but I do not think that Members get taken to the standards board because we have not quite been loyal enough to the Queen, or because something we have said has not been entirely consistent with the Oath. There is a separate code of conduct that we have to follow where the investigation of standards applies. We would not try to follow that from an oath. I am just not sure how the Members proposing the amendments could make the investigations and sanctions link to positive activities.

[Sammy Wilson]

First, we accept that if a pledge is made, there must be some way of measuring whether or not it has been lived up to. If it has not, there must be some way, by definition, of sanctioning someone for not doing so. Examples have been provided here today of how it is quite easy to work out whether or not someone has lived up to their pledge. If, for example, they make excuses for paramilitary activity or make excuses for people who have engaged in acts of violence, they are clearly not keeping to the pledge of office.

[Nigel Mills]

I entirely agree. Where someone says or does something that clearly contravenes the undertakings they have given, we should be able to investigate it and sanctions should be available. My slight worry is that the amendments might allow a complaint to be made that somebody had not sufficiently challenged all paramilitary activity—that they had not said enough times how heinous such activity is, or they might not have taken any physical action in the community, for example. I am not sure how it can be proved or enforced when somebody has not done something. That is my point. If we wanted a code of conduct that could be followed, it would have to be clear that people were prohibited from speaking or acting in any way in support of paramilitaries.

[Sammy Wilson]

Does the hon. Gentleman accept that if that were the case, the Assembly Commissioner, or whoever was making the adjudication, would be able to make a judgment about whether a complaint about the pledge of office was valid or not? It could be simply said, “Look, that is not what is meant by the pledge: it is not about the quantity; it is about whether someone should be condemned on the basis of support for paramilitary activity.”

[Nigel Mills]

I am sure that that could be said, but I am not sure whether that is set out in the amendments. We all know that such processes can be abused for partisan reasons, by people making scurrilous complaints that we know will never go anywhere, but which take up time and cause anxiety and spending.

Let me provide a further example. There is another pledge to support those who are determined to make the transition away from paramilitarism. There could be a complaint that somebody had not given sufficient support to those who wanted to move away from paramilitary activity. That would be a nonsense, because there could be many reasons why an individual might not have given that degree of support in that situation. What kind of support are they meant to be providing as an individual MLA? I think we need to be cautious about moving from a set of extremely well-meaning and well-intentioned objectives, such as enforcing acceptable pledges and undertakings, and making them into a code of conduct that I believe we would struggle to enforce sensibly in this form.