Oral Answers to Questions

Debate between David Gauke and Steve Baker

Tuesday 25th October 2016 Commons Chamber

[Mr Gauke]

The UK is in discussions with the EIB.

[Mr Steve Baker (Wycombe) (Con)]

Does my right hon. Friend agree that reducing anti-competitive market distortions is both a great fiscal way to promote manufacturing and a way of ensuring our country is best placed for new trade deals?

[Mr Gauke]

I agree that removing distortions in the economy results in a more efficient economy. The UK Government have a record of doing that, by, for example, reducing corporation tax.

Oral Answers to Questions

Debate between David Gauke and Steve Baker

Tuesday 19th April 2016 Commons Chamber

[Mr Gauke]

The hon. Gentleman will be aware of the Treasury analysis published yesterday that shows the various models and the consequences were we to leave the EU, including a permanent reduction in our GDP compared with what it otherwise would be and significant damage to productivity growth. The hon. Gentleman is right to highlight that point.

[Mr Steve Baker (Wycombe) (Con)]

Do the Government welcome the opportunity to bring forward actual data without the need to project forward 14 years using techniques that have proved to be inaccurate every six months?

[Mr Gauke]

As I said, HMRC has gone through the data and will provide them to the ONS. It is for the ONS to decide the timing, but I have drawn the House’s attention to what it has said.

Returning to the Treasury analysis, it compares one scenario with other scenarios, and all three possible scenarios for leaving the EU would leave this country poorer than we otherwise would be.

HMRC and Google (Settlement)

Debate between David Gauke and Steve Baker

Monday 25th January 2016 Commons Chamber

[Mr Gauke]

All businesses have to pay tax under the law. It is under this Government that we have seen the diverted profits tax brought in, and it is under this Government that we are seeing the BEPS process change the behaviour of companies. We did not see any of this from the last Labour Government, and all we end up with is unsubstantiated claims about sweetheart deals, insulting HMRC staff, who have worked for years to ensure that Google and other companies pay the tax due under the law.

[Mr Steve Baker (Wycombe) (Con)]

Does the Minister agree that in the mad world of corporation tax on international companies this sum of money is at once derisory, substantial, lawful and completely unacceptable to the public, and will he therefore also agree that it is time for a complete overhaul of the corporate tax system?

[Mr Gauke]

The point I would make is that this is a highly complex area, but there is a need for international co-operation in it, which is why we instigated the OECD looking at this as part of the BEPS process. That process has come forward with a number of recommendations. We have already legislated for two of those recommendations. There is a third that we are specifically looking at and consulting upon in terms of interest deductibility. It is right that we bring the international tax system up to date to reflect the way multinational companies are working. This has been left for too long; we are taking action.

Finance Bill

Debate between David Gauke and Steve Baker

Monday 26th October 2015 Commons Chamber

[Mr Gauke]

It is not just a matter of the EU law; the UK courts would ensure that we have to comply with the law, one way or the other. I suspect that my hon. Friend the Member for Stone (Sir William Cash) would be happy to explain the position to the hon. Lady, but it would not be lawful for us to reduce that rate.

[Mr Baker]

I have listened extremely carefully to my hon. Friend and he knows how seriously I take this issue. Will he reassure me directly that he will specifically press the European Commission to bring forward measures to zero-rate tampons and sanitary products right across the EU?

[Mr Gauke]

Yes, I will make those representations to the European Commission to allow member states to have the flexibility to do that, which I think is the key issue here.

On the climate change levy, let me briefly explain the policy rationale, as we have debated this on a number of occasions. The climate change levy renewables exemption was misaligned with today’s energy policy, providing indirect support to renewable generators when the Government are now investing in more effective policies that target them directly. Together, policies such as the renewables obligation and the feed-in tariff will provide more than £5 billion-worth of support to renewable electricity generation in 2015-16 alone. I do not believe the report on this clause is necessary. The Chancellor has already written to the Chairman of the Treasury Committee in August setting out the environmental analysis of the summer Budget in 2015.

On enforcement by deduction from accounts, we believe that we are introducing a necessary measure and that we have struck the balance correctly. I am grateful for the remarks made by the hon. Member for Wolverhampton South West in pointing out that the safeguards are strong. I know he still has concerns about the measure, but the safeguards are strong and we believe we are striking the right balance.

To conclude, I urge the House to reject new clauses 1, 2, 7—if it is pressed to a vote, and I hope it will not be—10 and 11, and amendment 90.

Tax Avoidance (HSBC)

Debate between David Gauke and Steve Baker

Monday 9th February 2015 Commons Chamber

[Mr Gauke]

As I outlined in my remarks, the main focus for HMRC has been the use of civil penalties. That approach has been followed consistently under Governments of all colours. There has been one prosecution in respect of this evidence. It is worth pointing out that prosecutions as a whole are on course to increase fivefold in this Parliament.

[Steve Baker (Wycombe) (Con)]

Successive Governments have incentivised particular investments using tax inducements, only to be surprised when things are taken too far. Will my hon. Friend publish a report that shows the extent to which this debacle was created by tax inducements introduced by the Labour party?

[Mr Gauke]

There clearly have been issues with some tax inducements being used for avoidance purposes. To be fair, this matter relates more to tax evasion. None the less, it is important that legislation is tested and it is important that we now have a general anti-abuse rule, which we did not have in 2010, to ensure that reliefs and exemptions are not exploited in a way that is contrary to Parliament’s intention.

National Insurance Contributions Bill

Debate between David Gauke and Steve Baker

Tuesday 3rd February 2015 Commons Chamber

[Mr Gauke]

The hon. Gentleman goes to the heart of the question asked by the hon. Member for Birmingham, Ladywood (Shabana Mahmood) about who will qualify for the relief. As I have remarked, we are taking a power to define apprenticeships. Given that this is a devolved matter, it is important that we discuss it with the devolved Administrations. We want to support apprenticeships and will seek to achieve a broad definition for the purposes of the relief. However, the apprenticeship system across the UK is complex and evolving. Education and training is a devolved matter. Apprenticeships operate slightly differently in England, Scotland, Wales and Northern Ireland, and there are differences between Government-funded apprenticeships and independent employer schemes. The Government will discuss the definition of “an apprentice” with the Skills Funding Agency and its devolved equivalents before committing ourselves to a final definition. It is important that the definition is robust, satisfying minimum compliance standards while achieving the objective of supporting the provision of apprenticeships to the under-25s.

In terms of overall support for apprenticeships, the Government have done a great deal. We spend about £1.5 billion annually to support apprenticeship training. In Budget 2014, £170 million of additional funding was made available for apprenticeship grants for employers in 2014-16, providing a grant of up to £1,500 per apprentice for small businesses. The new budget will fund more than 100,000 additional incentive payments for employers to take on young apprentices.

It is also worth pointing out that in 2012 the National Audit Office recognised the strengths of the Government’s apprenticeship programme, highlighting how it continued to be valued by learners and businesses. It concluded that public spending on apprenticeships offered a good return, estimated at £18 for each £1 of Government investment. Evidence from the Department for Business, Innovation and Skills suggests that returns may be higher, at £28 for every £1 of Government investment. I hope Members will resist the temptation to criticise the substantial progress that has been made on apprenticeships over the course of this Parliament. It has been significant.

On the definition of apprentices, which I touched on earlier, there will need to be discussion with the devolved Administrations and the Skills Funding Agency. We want a robust definition, but we have to bear in mind the complexities in this area.

On eligibility, for a business to be eligible to work with training providers to create an apprenticeship programme, the employer offering an apprenticeship needs to employ an apprentice for a minimum of 30 hours per week, pay at least the national minimum wage for apprentices, support on-the-job learning and be involved in reviewing their progress. On the question raised by the hon. Member for Birmingham, Ladywood regarding manipulation, I would make the point that those safeguards are in the system.

One further point I believe is important is that, as the Government are doing with employment allowance and under-21s from April this year and as we did when we came to office and increased the threshold before employer national insurance contributions is paid, we have done a great deal to reduce the burden on businesses of employer national insurance contributions. That has helped in creating the substantial progress in employment we have seen in recent years. Had we pursued the policy we inherited—an increase in the jobs tax—we would not have seen that progress.

[Steve Baker (Wycombe) (Con)]

On reducing the burden on business, the Government have previously considered the notion of merging national insurance. Has the Minister made any progress down that line? I am acutely aware that national insurance still creates the impression that people have contributed to a fund out of which benefits are paid, when of course they are mostly pay-as-you-go. Can we reduce the burden on business, simplifying national insurance by simplifying the overall tax system?

[Mr Gauke]

My hon. Friend raises an interesting point in this context. He is absolutely right that the Office of Tax Simplification recommended we looked at that. There is quite a lot going on in relation to payroll: devolution of income tax in Scotland, the auto-enrolment of pensions and the introduction of real-time information to the payroll system. They have caused considerable challenges—all for good reason; all are doing much to improve the tax system—and we have held off pursuing further integration of income tax and the national insurance contributions system.

My hon. Friend was right to raise a point about people’s understanding of the tax system and greater transparency. The Government have introduced tax summaries so that people can see how much they are paying in income tax and national insurance. That brings greater transparency to our tax system, so we have made progress on that front. On the integration of national insurance and income tax more widely, it remains a position we continue to review. Some evidence from internal reviews was that the benefits to business of bringing the two systems together were perhaps not as great as some outside commentators had anticipated. In those circumstances, we did not want to rush into this matter, but I assure my hon. Friend that we continue to keep it under review.

[Steve Baker]

Will the Minister remind me whether tax summaries include employers’ national insurance? I am always conscious that when we are employees we must generate an amount of value for our employer somewhat greater than even our gross pay, so is employers’ national insurance contribution also reflected in the summary? If not, could it be?

Oral Answers to Questions

Debate between David Gauke and Steve Baker

Tuesday 9th December 2014 Commons Chamber

[Mr Gauke]

What is a fact is that the proportion of income tax paid by the top 1% for the years since the 50p rate was cut has in every year been higher than in any of the years in which the 50p rate was in operation. It is this Government who have made changes to stamp duty land tax—that was just last week—and to capital gains tax, and who have dealt with reliefs and exemptions, to ensure that the wealthiest play a greater share than they have in the past.

[Steve Baker (Wycombe) (Con)]

Is it not the truth that people are able to change their behaviours to reduce their tax liabilities, and is it not the case that if the Government want to raise more from the wealthiest, it is necessary to lower the rate to a point where it encourages them to earn and to pay?

[Mr Gauke]

As I said a moment or so ago, in the two years since the 50p rate was reduced to 45p, a greater share has come from the top 1% than in the previous three years. There is a lesson to be learned there. It is probably the reason why the previous Labour Government had a 50p rate for only 35 days out of their 4,758 days in office.

Tax Avoidance and Evasion

Debate between David Gauke and Steve Baker

Thursday 13th September 2012 Commons Chamber

[Mr Gauke]

If the right hon. Gentleman will forgive me, I will turn to that point later, although I am sure the House is looking forward to debating this matter at greater length tomorrow—I know that he is.

These aggressive tax avoidance schemes are the reason we recently launched our consultation entitled, “Lifting the Lid on Tax Avoidance Schemes”, setting out ways to improve the information on avoidance available to the public and making it easier for taxpayers to see whether their adviser has promoted failed avoidance schemes in the past. I have been encouraged by the response of the professional bodies, which share the aim of addressing the small fringe of cowboy advisers who promote such schemes. Some of the criticism of the tax profession as a whole has been unfair, but there is an issue with some aspects of it, which is why we are consulting on what we can do to address the problem and also to expand the regime covered by DOTAS—the disclosure of tax avoidance schemes—which the hon. Member for Newcastle upon Tyne North (Catherine McKinnell), speaking for the Opposition, touched on. She is right that between its introduction in 2004 and the end of March 2012, it resulted in a total of 2,289 avoidance schemes being disclosed to HMRC. That, in turn, has led to more than 60 changes in tax law to stop avoidance.

[Steve Baker]

My hon. Friend makes his case powerfully, but I am concerned that we are locked into a paradigm of complexity and trying to deal with the consequences of that complexity. Does he share my view that if only we could find a route to tax simplification, we could make some of the problems disappear at source?

[Mr Gauke]

My hon. Friend is right to say that tax simplification has an important role. I do not think that it is a magic bullet or that it cures every problem, because there will inevitably be some complexity in a modern economy. However, where we can remove some of those complexities and boundary issues, that is clearly helpful. My point is that DOTAS is a valuable part of our tax regime, but we want to improve on it. There is scope for improvement, and more information could and should be disclosed to HMRC to enable it to address tax avoidance.

Let me turn to the GAAR. We are improving how we counteract avoidance once it is detected, through the UK’s first general anti-abuse rule. I note the criticism made by Labour Members, but when they were in power—indeed, some of them were distinguished in the former Government—they refused to bring forward a general anti-abuse rule. The GAAR will specifically target the most aggressive and persistent forms of avoidance without undermining taxpayer certainty or adding undue compliance costs to the tax system. I am confident that, unlike other suggested approaches, the Government’s approach strikes the right balance between protection against avoidance and clarity for taxpayers.

I know that there is an alternative argument, based on the proposal from the right hon. Member for Oldham West and Royton, which was drafted by Richard Murphy, as he said. However, I would make this argument to him:

“I…think that many appropriate checks and balances are built in to the drafting. HMRC cannot use this”—

the GAAR—

“willy-nilly, and that’s right. This should be a tool of last resort and not a battering ram for widespread use.”

Those words are from Richard Murphy, who was commenting on Graham Aaronson’s proposals. I know that Mr Murphy will be following this debate closely, and I think it right that we quote his views thoroughly. He also said:

“Appropriate defences for action are built in. Safeguards to prevent HMRC over-using the provision are included. The result is that the rule will be used against egregious cases, and not be aimed at all tax planning. That’s right: where the law provides for choice, planning is inevitable and right and I for one have never denied that fact.”

Finally, Mr Murphy said this in response to the Aaronson proposals:

“Let’s have no doubt about it: this is a very big step forward for tax justice and I warmly welcome this report and hope it moves rapidly towards becoming law.”

I entirely agree with those comments. I do not, in all fairness, always agree with Mr Murphy, and he does not always agree with me, but on this occasion he is absolutely right to set out the fact that there are safeguards.

I want to let the right hon. Member for Oldham West and Royton respond, but let me quickly deal with evasion. We encourage compliance, while making it clear that if people do not take the opportunity, we will find them and they will be subject to stringent penalties, and possibly prosecution. The measures that HMRC is taking include: 1,000 extra prosecutions a year for tax evasion by 2014-15; an enhanced, state-of-the-art risk profiling tool, Connect, that helps to identify tax cheats by cross-matching data to uncover hidden relationships between people and organisations; campaigns and new policies—such as the contractual disclosure facility—to encourage voluntary disclosure of evasion; specialist staff to provide a single point of contact for the 2,000 largest businesses and to address the growing risk of cybercrime; and taskforces carrying out intensive reviews in high-risk trade sectors.

We are active in tackling offshore evasion activity. That concern was raised by a number of Members. We now have a number of agreements with other tax jurisdictions, including the Liechtenstein disclosure facility, which the hon. Member for Newcastle upon Tyne North mentioned. That will require financial intermediaries to identify those who may have a UK tax liability, and it is expected to raise £3 billion by 2016. More recently, the Government have finalised a ground-breaking agreement with Switzerland on tackling tax evasion. It will apply to UK-based Swiss account holders and is expected to raise £4 billion to £7 billion a year.

Collectively, the avoidance and evasion measures that I have set out today, along with our record on general compliance, show how seriously this Government take any threat to our tax base. We are not complacent, however, and our plans to take a tougher stance on disclosure rules and the promoters of avoidance, to introduce a general anti-abuse rule, and continuously to target those who illegally evade tax all help to demonstrate that fact. I hope that the House will appreciate the steps that we are taking.

Finance (No. 3) Bill

Debate between David Gauke and Steve Baker

Monday 4th July 2011 Commons Chamber

[Mr Gauke]

I know that my ministerial colleagues in the Department for Business, Innovation and Skills are watching this debate very closely and will have listened to the hon. Gentleman’s representations. I noticed that when he referred to the House as a whole, he gestured to my hon. Friend the Member for Wycombe. Whether the hon. Gentleman and my hon. Friend necessarily represent the views of the House as a whole on all issues I am not sure, but the hon. Gentleman raises a fair point.

[Steve Baker]

May I say that I think the reason for this unlikely alliance is that the workers now are the capitalists through their pension funds and other investments? I remember a trade unionist explaining to me with some care the new movement for workers’ capital and I think we will be missing a trick as a free-market Government, if indeed we are a free-market Government, if we do not recognise that the workers now are the owners and that we need to help them take control of what they own.

[Mr Gauke]

I do not know whether my hon. Friend is trying to lose the support of the hon. Member for Hayes and Harlington on this, but I fully take his point on board and I shall ensure that BIS is aware of this debate. My right hon. Friend the Business Secretary has said that shareholder accountability is an area that his Department will be looking into in the autumn.