Tackling Corporate Tax Avoidance: EAC Report

Lord Lipsey Excerpts

Wednesday 30th October 2013 Lords Chamber

[Lord Lipsey (Lab)]

My Lords, as a member of the committee, it would not be seemly for me to blow its trumpet—although I do not mind giving a toot or two for our chairman, who did such an admirable job. The report was generally welcomed as a very balanced one. We did not accept the proposition put to us by many of our witnesses that all was for the best in this best of all corporate tax worlds—a suggestion that many of us ascribed to the fact that many of them made their money advising on precisely that system. But nor did we side with Richard Murphy and the Tax Justice Network, with their ambitious plans to milk the corporates.

It was a balanced report, and it went down well—except with Her Majesty’s Government. I have rarely read a more dismissive—and, I am afraid, at points arrogant—response to a Select Committee report. “No, we won’t review corporate taxation. What a silly idea”, “No, we won’t look at tax relief on interest”, “No, we won’t register tax advisers”, “No, we won’t penalise those caught under GAAR”.

I once wrote a book on the Treasury—little read today, I am afraid—and I am generally a supporter of it in all the difficult jobs it does, warts and all. But this response is a very big wart. What explains the tone of the response? The answer is simple. The clue is on page 2, where the Government say that they are taking action,

“first, to make the UK tax system more competitive … second, to clamp down on tax avoidance … and third, to drive forward reform of the international tax framework”.

I can paraphrase that as follows: “We would quite like less tax avoidance. However, if we do anything to get it, we shall put firms off locating in Britain, where we want them. So the best thing is to minimise national measures. We’ll have to do a few things to pacify the pop newspapers and Margaret Hodge, but meanwhile we’ll concentrate on international measures”. The result of that is that the Starbucks, the Amazons, the Googles and the food companies exposed by the Independent can laugh at us.

With this excessive tolerance we are encouraging an international race to the bottom. Corporation tax rates worldwide are falling. If others think like us they will act like us, and corporate tax will soon be a thing of the past. The noble Lord, Lord Lawson, would welcome that, as he said—and so might I, so long as it was replaced by something equally lucrative to the Exchequer, and preferably more, rather than less, progressive.

The “do nothing nationally” approach enshrined in the response is extended by the Government to measures that would not in any way affect the international competitiveness of our tax system. For example, the report canvasses a proposal for a register of tax advisers, which might facilitate action being taken against those who give egregious advice to their clients, and an accompanying code of conduct. The Treasury does not explain why it rejects this; that would be too much bother, I think. It just says that the Government,

“does not regulate the tax profession”,

as if their failure to do what the committee recommended was a decisive argument against doing so. Honestly, whether or not noble Lords share my view of the committee’s report, it deserves better than this. This is not the response of a Government who are seriously concerned to do anything about corporate tax avoidance and evasion. I hope that this complacency will not be repeated by the Minister in his reply this evening.