Tax Avoidance and Multinational Companies

David Mowat Excerpts

Wednesday 3rd February 2016 Commons Chamber

[Mr Gauke]

There is a whole host I could draw attention to, but in the interests of time, I will not run through that lengthy list. I have it here, and there are quite a number of cases—there are 40 I can identify straightaway—where there were loopholes, and we have tried to address that.

The diverted profits tax—I will come back to this again in detail in a moment—is designed to ensure that, where companies divert their profits away from the UK, and where the economic activity is happening in the UK, we get some of the tax yield.

[David Mowat (Warrington South) (Con)]

The difficulty with the economic activity test the Minister talks about is that it is intrinsically judgmental, and that gives us many of the issues that we try to grapple with. The test came in in the 1920s, way before the internet. Might it not be a way forward to move more towards taxing sales and, if necessary, dividends, with less on corporation tax, which would take these judgments away?

[Mr Gauke]

The first point to make is that this is a debate on the operation of the tax law as it stands, not on how people might want it to be, and to be fair to HMRC, it can only collect the tax that is due under the law as it stands, not as how people might want it to be. On reform of this area, there is no reason why we should not debate these matters. However, with regard to a move towards taxing profits on the basis of sales—there is a perfectly respectable case for reform in that direction—I would be worried about the impact on, for example, the UK’s creative and scientific sectors. I have mentioned the video games sector, and one could also look at pharmaceuticals. There are a number of areas where the UK—businesses in our constituencies—would lose out in those circumstances, so I would be a little wary about it.