Tackling Corporate Tax Avoidance: EAC Report

Lord Davies of Oldham Excerpts

Wednesday 30th October 2013 Lords Chamber

[Lord Davies of Oldham (Lab)]

My Lords, I have read the report and congratulate the committee on the excellent work it has done and the judicious way in which it has presented its arguments. The chairman of the committee who introduced the report today—the noble Lord, Lord MacGregor—continued that pattern in identifying the committee’s arguments. He indicated that the Government had not responded constructively to an issue which the committee clearly recognises is one that exercises the public and is of considerable immediate importance. The chairman’s judicious and careful presentation was somewhat submerged in the subsequent debate in which noble Lords forcefully expressed the view that the Government’s response was utterly inadequate. I think that the noble Lord, Lord Lawson, called the response lamentable. Other noble Lords have indicated that the response goes beyond complacency and is not worthy of a government response to a Select Committee report.

I will comment on several of the speeches made in the debate but it also falls to me to congratulate the noble Lord, Lord Leigh, on his maiden speech, in which he expressed himself with great precision. However, he also did something which is quite exceptional in this House in that he apologised for speaking briefly. He will not encounter brevity too often and he will never find it accompanied by an apology except on this occasion. However, we are grateful to the noble Lord for the points he made.

My noble friend Lord McFall wasted no time in identifying the context in which the report was presented. The committee feels very hard done by in terms of the Government’s response given the serious level of public discontent about corporation tax that has manifested itself over the past 18 months. The public outcry was sufficient for Starbucks to decide that it merited a gesture on its part in the form of making a contribution to the Revenue. My noble friend said that the public felt there was a breakdown of the national contract. That may not be putting it too high. After all, everyone knows that in this time of great austerity and difficulty, when wages have not increased over the past 10 years, people are paying their taxes, as they are obliged to do, and they find it scandalous that some large organisations can treat corporation tax almost as a voluntary levy to which they pay mere lip service. That is why the Government’s response ought to be much more positive.

We have encountered many difficulties with regard to these issues. My noble friend Lord Browne referred to the scale of the tax gap and asked whether that gap was increasing or decreasing. There are clear reports that in the last recorded year the gap was £34 billion, and that it has gone up £1 billion since then. However, as my noble friend indicated, it is very difficult to put the basis on which these figures are presented into clear perspective. That is why it has been constantly argued throughout the debate that the first thing we need is transparency on the part of companies and the second is accountability on the part of HMRC. We all know what the Government’s response was to the question of accountability. The committee stated:

“The threat of naming and shaming represents a reputational risk to companies; and may therefore have the effect of encouraging boards to make sure that the companies they run are not using inappropriately aggressive tax avoidance strategies”.

The Government’s response is that the Government are subject to taxpayer confidentiality rules that protect the tax affairs of all taxpayers. In other words, there is to be no advance in that area, or on the committee’s constructive recommendation that there should be parliamentary scrutiny not dissimilar to that which obtains with regard to the security services: that is, a parliamentary committee should be established to look at these issues on a confidential basis. However, the Government are, of course, utterly and totally dismissive of that proposal. This will not do. It certainly will not do against a background of a determination to make progress in this area at an international level, as my noble friend Lord Brennan indicated. Where is the UK to figure in this? The committee obviously hoped that we would be in the van of progress. The Government’s response makes them look as if they want to be as distant from such progress as they can possibly be.

The Minister has a significant task ahead of him in winding up the debate. I have not even reinforced the points which my noble friend Lord Hollick made about the successful use of eurobonds on the part of multinationals, and indeed on the part of some British companies which are not multinationals. Thames Water, which has approached the Government on the issue of a subsidy with regard to a big investment it wishes to make, is also reducing the tax it pays through the use of the eurobond device which my noble friend Lord Hollick identified. However, there seems to be no response whatever to that point.

Has corporation tax had its day, to use the colourful phrase of the noble Lord, Lord Lawson, who should know about these things? I do not know whether that is the case but it is certainly in need of considerable reform, as the committee identified. The Government’s response makes them look as though they regard those arguments as having being drafted on another planet and therefore are ones to which they have no need to make a coherent, consistent or constructive response. I hope that the Minister does rather better this evening.