Finance (No. 2) Bill

Stephen Doughty Excerpts

Wednesday 17th April 2013 Commons Chamber

That review, called for by our amendment 6, should of course include considering how the Government would take steps to notify developing countries’ tax authorities of tax schemes that have been identified, to assist in the recovery of that tax. I am quite sure that that proposal will at least have the support of Liberal Democrat Members on the Government Benches, given that their party’s spring conference passed a motion effectively calling for the same measure just last month. [Interruption.]

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

My hon. Friend has made very strong arguments. Will she join me in commending the work of organisations such as ActionAid, Global Witness and the Tax Justice Network, who have done excellent work in exposing a number of examples of corporate tax avoidance in countries such as Zambia, particularly resource-rich countries, and the devastating impacts those are having? If we did not have those stories out there, we would not be aware of the scale of the avoidance that is going on and the impact that it is having in those very poor countries.

[Catherine McKinnell]

I thank my hon. Friend for that intervention, which is powerful in itself, but very much reinforces the argument that we on the Front Bench are making today: we have the means within our grasp to make a difference to that situation. I hope that the Minister will provide some reassurance today, and that we shall get some Liberal Democrat support for our amendments, which seek to make a real difference on the ground. [Interruption.]

Returning once again to an amendment tabled by the Opposition last year—and I might say amendments tabled by Liberal Democrat representatives last year but which were withdrawn at the last minute—we believe that changes to the controlled foreign company rules introduced by the Finance Act 2012 should be properly monitored for their impact on developing countries. Many charities have been concerned that the CFC rule changes will make it easier for UK companies to avoid paying tax in developing countries in which they own subsidiaries. While the Government have estimated the potential loss to developing countries at £1 billion, which one would think would be enough, ActionAid believed it could be as high as £4 billion a year. So what we really need is for the Government to undertake a proper assessment of the impact of the changes on the overall tax take of developing countries since last year, and our amendment asks for that to take place.

In conclusion, we will support the Government’s legislation, brought forward today, to introduce a GAAR. However, we believe, along with my right hon. Friend the Member for Oldham West and Royton (Mr Meacher), who has tabled his amendments as a suggested alternative to the GAAR, that the Government’s GAAR has many potential flaws.

[Catherine McKinnell]

We support our amendments that we have tabled, and I have presented very clearly the reasons why we support them. I will go on to say why. We support the GAAR and we welcome its being put in place, but we want to see how effective it will be and we will continue to monitor it. We hope that the Government will accept our proposal to come back and report on progress within two years, so that we can continue to monitor its effectiveness and rectify, hopefully, some of the flaws that we see will hinder its effectiveness in tackling this problem. So we call on all—

[Stephen Doughty]

In terms of who will be supporting which amendments, was my hon. Friend not surprised a moment ago to hear comments from a sedentary position from one of the Liberal Democrat Ministers—in fact an International Development Minister—saying that she doubted their support? Having read previous Liberal Democrat policies on this area, I have to say that over the years they have been fairly progressive and very extensive. Was my hon. Friend not surprised to hear those comments?

[Catherine McKinnell]

I am very shocked to hear of those comments. I missed them at the time. If the Minister wants to explain her position or the Liberal Democrat Front-Bench position on these amendments, I will be glad to hear it.

--- Later in debate ---

[Stephen Doughty]

The right hon. Gentleman made a significant point about the importance of supporting developing countries in developing their tax systems and revenue collection capacity. Was he not surprised, as I was, to see the 8% underspend in the Department for International Development budget this year, given that the Department has given significant support to such projects in the past? Perhaps less support will be going to such activity in future because of that underspend.

[Andrew Stunell]

In all honesty, I was not surprised because that rule has always been in place. I do not have to hand figures on any similar underspend before 2010, but if I did I am absolutely certain that the Chancellor of the time would have repossessed it. That is part of the system of central Government control of our expenditure. I can understand that the hon. Gentleman is perhaps not in favour of strict control of public expenditure, but it is important that we do not lose sight of the overall objectives.

I shall conclude. I very much support the Government’s direction of travel on the issue. I am delighted that the general anti-avoidance rule is coming into place. The Government will know that I support the IF campaign and therefore I do not think they have gone far enough or yet fast enough. I look forward to the Minister’s giving me some words of comfort when he replies.