Draft Double Taxation Relief and International Tax Enforcement (United Arab Emirates) Order 2016
Draft Double Taxation Relief (Isle of Man) Order 2016
Draft Double Taxation Relief (Jersey) Order 2016
Draft Double Taxation Relief and International Tax Enforcement (Uruguay) Order 2016
Draft Double Taxation Relief (Guernsey) Order 2016
Rob Marris Excerpts(8 years ago)
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The Chair
First, I inform hon. Members that they can, if they wish, take off their jackets. [Hon. Members: “Hear, hear!”] I am here to help. Secondly, the orders can be debated together if that is the Committee’s wish. It means that we would have an hour and a half as opposed to a longer debate. Is that the wish of the Committee?
Rob Marris (Wolverhampton South West) (Lab)
I agree to that, Mr Hanson. It is a pleasure to be here with you as Chair. If you and the Minister agree to this, could we do it all in one debate but in two chunks? There are five orders. To my mind—the Government may disagree—three of them go together because they relate to Crown dependencies, and two of them, on Uruguay and the United Arab Emirates, go together because they follow a broadly OECD model.
The Chair
If the Committee agrees to debate the orders together, the debate will be an hour and a half long, and if the Minister agrees, they can be debated in two sections within the hour and a half.
The Chair
Order. Although I appreciate why the Minister has spoken to the Jersey order, the motion before the Committee is that it has considered the draft Double Taxation Relief and International Tax Enforcement (United Arab Emirates) Order 2016. I will call Mr Marris to speak, and he can obviously at that stage refer to the Jersey order as part of the discussion.
Rob Marris
I am sorry if I got the Minister off on the wrong foot; I take responsibility for that. Just to clarify, would it be in order to reverse matters? I believe that we are to have a decision at the end of the hour and a half or sooner. I could talk about Jersey, Guernsey and the Isle of Man because the Minister has talked about them, and then, if you agree, Mr Hanson, we could deal separately, as it were, but within the one debate with the orders on the United Arab Emirates and Uruguay.
Rob Marris
Thank you, Mr Hanson; I appreciate your indulgence. I will be brief on Jersey, Guernsey and the Isle of Man. As would be expected, I have some questions for the Minister, although not many. The Jersey agreement goes back to 1952 and has been amended three times since then. The Guernsey agreement goes back to 1952 and has been amended three times since then. The Isle of Man agreement goes back to 1955 and has been amended four times since then. In terms, the three statutory instruments that will be decided on today are the same. They all refer to closing the potential loophole to which the Minister referred. That loophole relates to immovable property, which is defined in each of them—I will not read out the definition, but in essence, it refers to land, agriculture and forestry. In the 1950s in the Isle of Man, Jersey and Guernsey, there was land, agriculture and perhaps some forestry. I am slightly surprised—clearly, this is not just about this Government, given that there were 13 years of Labour Government—that after these have been around for 50 years, somebody seems to have noticed a loophole about land. I am slightly bemused by that, so I wonder whether the Minister could fill us in a little.
Secondly, will the Minister say a little more about the apparent retrospectivity? These measures all go back to 16 March 2016—that is, they would take effect, as per the wording of the statutory instruments, as I understand it, some three months ago. To me, that seems slightly unusual, but perhaps the Minister could talk us through it.
My third question is more on procedure. It bemuses me, and again, I hope the Minister can help the Committee with this, that in the explanatory notes to the statutory instruments—as opposed to the separate notes we get—it says, for example, in the final paragraph of page 5 of the Jersey order:
“A Tax Information and Impact Note has not been produced for the Order as it gives effect to a previously announced policy to enact a double taxation agreement.”
That bemuses me because it seems to say, “The Government have decided to do this, so we are not going to have a tax information and impact note.” I would have thought that if the Government decide on a course of action that needs, as these measures do, the approval of Parliament, it would be helpful to have a tax information and impact note—even a brief one—rather than simply saying, “We have decided to do it so you are not going to get such a note.” Perhaps the Minister could talk us through that.
Mr Gauke
I thank the hon. Member for Wolverhampton South West for his questions. To answer his first question about why these treaties have not been amended before, we have taken action in this Budget to prevent a form of avoidance that HMRC became aware of relatively recently. This ensures that a loophole that would have prevented the implementation of measures to protect the UK tax base can be addressed. The challenge was first, a recognition that profits relating to land in the UK were being booked in these Crown dependencies—the view being that these profits properly belong in the United Kingdom—and therefore, we announced the Budget measure. The concern was that the measures that we took in the Budget could not be implemented without these changes.
Perhaps if I can address the second point—
Mr Gauke
If I can just address the second point, I think it may be helpful to the hon. Gentleman. The new legislation announced in the Budget will include targeted anti-avoidance rules that will stop property developers structuring around the new charging provisions during the period from the announcement on Budget day, which is the date that the new legislation comes into force. Making the protocol changes effective from Budget day aids the effectiveness of these targeted anti-avoidance rules. This is not backdating all retrospection, as such. The double taxation agreements are changed only from the date that the protocols were signed. The targeted anti-avoidance rules will apply prospectively only from Budget day. I hope that provides a bit of clarification to the hon. Gentleman.
Rob Marris
I am grateful to the Minister for that explanation. Is it then the case that the, and I mean this positively, wonderfully innovative accountancy industry in the United Kingdom did not realise that they could advise their clients, quite legitimately, to offshore land profits—this is my shortening of the situation—to the Crown dependencies? They did not realise for 50 years, and then they suddenly realised and it started to happen. The Government then said, “That was never anybody’s intention, so the measures announced in the Budget”—in the statutory instruments today—“will stop that.” Or is it something else?
Mr Gauke
I understand the hon. Gentleman’s point. I want to be perhaps a little a cautious, if not tentative, about the wording. That is not to say that nobody was making use of these provisions—I think that people were making use of them. However, it was relatively recently that Her Majesty’s Revenue and Customs became aware that this loophole—I think it would be fair to describe it as that—was being used. That was not really the intention of Parliament. One could make an argument—if Parliament addressed its mind to this matter—that it would certainly not be the way that we want the system to work. In recent months, in the run-up to the March Budget, it was concluded that action needed to be taken. These changes to the protocols are all part of ensuring that this is effective.
If I can deal with the third question, I will then make my comments about the double taxation agreements. I was asked why there is no TIIN—tax information and impact note. We have not produced impact assessments because double taxation agreements are not of a regulatory nature. They impose no obligations on taxpayers. Rather, they give UK residents relief from foreign tax in prescribed circumstances. They also provide relief from UK tax for non-residents in a comparable situation. Given that the hon. Gentleman has raised that specific point, perhaps we will look again at the wording of the explanatory memorandum to see whether we can provide a clearer explanation next time. He has made a constructive point.
If I may, Mr Hanson, I will turn to the two other orders, on the United Arab Emirates and Uruguay. This first-time double taxation agreement with the UAE completes our DTAs with the Gulf states and follows the same principles that we have adopted with the other countries in the region. Although the UAE does not currently impose tax on individuals or companies, it has the potential to do so. Legislation was in place, but the UAE chooses for the moment not to apply it. Concluding the DTA now ensures that should the UAE start to apply its tax laws, UK companies will have greater certainty over the liabilities, as the taxing rights are constrained by the treaty.
The DTA generally follows the OECD model. Dividends are exempt from withholding tax, other than where the payer is a real estate investment trust, in which case 15% tax may be charged. Interest and royalties are also exempt, but with a provision to ensure that the benefits of the interest article can flow only to UAE residents and companies owned by UAE residents. The exchange of information article is the latest OECD version, which permits information to be used for non-tax purposes with the permission of the other state.
The Government signed a first-time DTA with Uruguay earlier this year. This is an important treaty for the UK as it expands our treaty network in an increasingly important region. The treaty gives valuable benefits to UK businesses and individuals with interests in Uruguay and will strengthen the economic ties between the two countries.
Withholding taxes can hamper cross-border investment, as they represent an extra and often excessive layer of taxation. I am therefore pleased that withholding tax on dividends is restricted to 5% on direct investment and interest is taxable at source at a maximum of 10%, with some important exemptions—for example, for certain bank loans. As we sometimes do with a country whose economy is in transition, we have agreed a provision that allows the taxation of services in the country where they are performed where they last for more than 183 days. The treaty also contains anti-treaty shopping provisions based on the BEPS—base erosion and profit shifting, as you know, Mr Hanson—recommendations on treaty abuse, the latest OECD exchange of information article and an arbitration provision to assist the mutual agreement procedure, which will be welcome to UK companies investing in Uruguay.
I hope those explanations are helpful. I commend the orders to the Committee and I am happy to answer any remaining questions that hon. Members may have.
Rob Marris
I shall try to be brief for the benefit of Minister. It may be that, on certain things, he would kindly offer to write to me. He will know whether he can make that offer when he has heard what I have to say.
I thank Treasury officials, particularly Mr Tom Matthews, for meeting me beforehand to go through these. Any accuracies are theirs, any inaccuracies are mine and any policy pronouncements are mine also. They gave me a talk through of a technical-only nature. As I understood it, the Uruguay agreement was negotiated after the United Arab Emirates agreement. When I go through them there are some differences in wording. There are always going to be some because it takes two to tango and make an agreement, and a country might agree to go with the OECD model but with certain tweaks, just as somebody buying a car gets certain bells and whistles and somebody else does not.
However, I gather that the agreements are, in a sense, generationally different, because when the model for the UAE agreement was used and negotiated successfully, as we see in the statutory instrument, the principal purpose test—which is in the Uruguay agreement—did not exist in the OECD model. The Uruguay agreement uses a later OECD model. That might explain quite a lot of why, when I compare the two, there is much common wording, but also some that appears to me to be different. That may not simply be different because of the different models, but it may be that it is.
I wonder whether, to save the Committee time—others on the Committee may not agree to this—the Minister might write to me, not necessarily in exhaustive detail, to set out some comparisons between the Uruguay agreement and the UAE agreement. No one would thank me if I went through the orders, article by article, and said what is in one and not in another and asked the Minister why. I am not sure that that would be a productive way to proceed. If the Minister felt able to write to me on that, it would be helpful.
I note with some amusement—again, for those who have been on these Committees before; the Minister has—that the UAE agreement refers to “entertainers and sportsmen” under article 16, whereas article 16 of the Uruguay agreement refers to “artistes and sportsmen”. “Entertainers” have become “artistes”. I do not think that has anything to do with the OECD update; the Minister may tell me. These things seem to vary from country to country.
One thing I say with a little more seriousness to the Minister is that, although I appreciate these things have to be negotiated with other countries, and I know a little bit—not a massive amount—about legal drafting because, like the Minister, I have a legal background, if we could find a better word than “sportsmen”, it would be a little bit more “with it”, as it were. I appreciate that the pronoun “he” rather than “she” is used because it can get awfully cumbersome in legislation to do otherwise, but can we not think of something different from “sportsmen”?
Peter Grant
If you continue to curry favour in that way with Members, who knows where you could be in a few years’ time.
I am happy to support the draft orders but I have a few questions that I hope the Minister will answer. Clearly, the UK has a very different relationship with places like Uruguay and the UAE compared with the Crown dependencies. It is noticeable, however, that the Uruguay and UAE agreements also include new provisions on information sharing on potential tax liabilities. Do we already have adequate information sharing with the Channel Islands and the Isle of Man? If not, is that something we need to return to?
Secondly, with regard to the Uruguay and UAE information sharing, does the confidentiality requirement prevent us from sharing that information further? If, for example, an inquiry is being carried out by the tax authorities elsewhere in Europe or the United States, are the UK authorities prevented from sharing information that we have got under this agreement that might help to uncover large-scale tax avoidance and evasion in Uruguay or the UAE?
There is a second point with regard to the definitions. In some ways it might appear to be very nitpicking to look at the definitions, but if we get them wrong or do not understand their meaning—with no disrespect to hon. Members present—the lawyers will have a field day and the taxpayer is likely to lose out. The definition of immovable property in all the draft orders is, in essence, not surprisingly, whatever the law in the individual country or state says. Is the Minister aware of any significant differences in definition of immovable property in the different places? Are there any instances of where a different definition of immovable property would mean that what we get is something different from what we think? To me, as a lawyer, it is obvious what kinds of property can and cannot be moved, but I know that slight differences in definition might give us problems.
I hope that we will get answers to my questions today, but I am happy for the Minister to write to me at a later date if not. The principle, however, is one that we can all enthusiastically support: it is not fair for someone to be taxed more than once on the one economic activity; and it is extremely unfair for someone not to be taxed at all on any large-scale economic activity.
Related to that, it is becoming more widely accepted that the principle should always be that the tax liability arises in the place where the economic activity takes place. We are all keen for that principle to be extended, particularly in the developing world, so that if international corporations make profits from the hard work and resources of some of the poorest countries in the world, the tax liability will go back to the Governments of those countries, to ensure that not only the workers, but the public services and tax income of the least developed countries get a proper benefit for the efforts of their citizens and, sometimes, the use of their natural resources.
I certainly applaud the direction of travel represented by the draft orders—we are creating a worldwide tax system, which is fairer not only because it prevents people from paying more than they should, but because it ensures that those who have got away with not paying for far too long will gradually find that more and more loopholes get closed. As a result, public services in our country and in many other parts of the world will be properly financed by the people who should be financing them. With those words, I am happy to support the draft orders.
Oral Answers to Questions
Rob Marris Excerpts(8 years ago)
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Rob Marris (Wolverhampton South West) (Lab)
As someone who spent several years as a bus driver, I know that one factor that encourages tourism is integrated ticketing on public transport. Will the Minister have a word with the Secretary of State for Transport about amending the Bus Services Bill to allow more integrated services and to enable councils to run bus services?
Mr Evennett
As the hon. Gentleman knows, that is not in my remit and is not for me to comment on. I can say, however, that the Chancellor has been rather generous with his spending on transport in this Parliament—50% higher than in previous years. We want to ensure that visitors have the confidence to explore Britain using public transport.
UK Economy: Post-Referendum Assessment
Rob Marris Excerpts(8 years ago)
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Mr Gauke
The economy is a key issue in the debate and in the choice that the British people will make on 23 June. Today’s analysis is an attempt to assist the British people in making an informed decision, based on the likely consequences of the United Kingdom leaving the European Union. Indeed, many supporters of the leave campaign have been prepared to acknowledge that leaving the EU would at the very least have a short-term impact on our economy and create a shock.
As my hon. Friend said, the analysis produced by the Treasury has been signed off by Sir Charles Bean, the former Deputy Governor of the Bank of England and a distinguished macroeconomist. He said that
“this comprehensive analysis by HM Treasury, which employs best-practice techniques, provides reasonable estimates of the likely size of the short-term impact of a vote to leave on the UK economy.”
It is not only the UK Government who are highlighting the risks of leaving the European Union; the International Monetary Fund, the OECD, the leadership of pretty much every ally we have, business groups, and many respected independent economists have all made it clear that this country would lose out from leaving the EU. However one looks at this debate, we cannot get away from that central fact.
Rob Marris (Wolverhampton South West) (Lab)
Unusually, perhaps, I find myself agreeing with a great deal of what the Minister has said. The hon. Member for Harwich and North Essex (Mr Jenkin) tried to rubbish the report and referred to trade agreements. If we were to leave the European Union, we would have to negotiate in very short order trade relationships with the rest of the world, including more than 50 other countries. Rome was not built in a day, and there would be huge uncertainty. As he will know—and as I know from having been in business—one key concern of business is always uncertainty.
At the moment, our economy is in great shape in terms of jobs, but on almost any other indicator—productivity, balance of payments, the housing crisis, investment in infrastructure, and the national debt, which has risen by two-thirds in the past six years—the economy already has red lights flashing, as almost every economist has said. Were we to leave the European Union, that would become considerably worse. I welcome the fact that the Prime Minister and the Chancellor of the Exchequer now recognise that the large majority of the problems we faced in 2008 and onwards were caused not by a Labour Government, but by a world recession. We now need not a Tory Brexit, but an economy that is strong and will remain stronger if we stay in the European Union, but that still needs considerable changes, particularly in investment in infrastructure and skills. Our security, both economic and military, will be strengthened if we remain within the European Union. We should build on a strong economy by investing, not by leaving the European Union.
Mr Gauke
The hon. Gentleman’s point about uncertainty is right, and there is clearly uncertainty in the economy at the moment as a consequence of the referendum on Brexit. It is absolutely right that we have that referendum, but such uncertainty can resolve itself quickly on 23 June if there is a remain vote. If there is a leave vote, we clearly face at least two years of uncertainty, and quite possibly longer.
On the state of the economy—this is perhaps where the hon. Gentleman and I may differ—we have taken steps to address the long-term challenges faced by the economy, but there is no doubt that the past few years have been difficult for the British economy. We are now one of the fastest-growing major economies in the world, and our progress over the past six years would be put at risk were we to vote to leave the European Union.
HMRC: Building our Future Plan
Rob Marris Excerpts(8 years, 1 month ago)
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Rob Marris (Wolverhampton South West) (Lab)
Well, Minister, it’s all a bit of mess, isn’t it? I congratulate the hon. Member for Glasgow South West (Chris Stephens) on securing the debate. He touched on staff morale, the workforce figures and the fact that there has been no ministerial statement. Along with several other hon. Members, he also mentioned the shameful Mapeley contract, signed—I am sad to say—by a Labour Government who did not realise at the time that it was an overseas company.
My hon. Friend the Member for Walsall South (Valerie Vaz) touched on a point dear to my heart when she mentioned HMRC’s curious governance arrangements. She also referred to the strange fact that people in her constituency, which is close to my constituency, will have to travel to an HMRC centre in Birmingham, where rents are much higher than in Walsall or Wolverhampton, where, I am disappointed to say, the Government propose to close Crown House. The hon. Member for Dundee West (Chris Law) quite rightly mentioned the imbalance of resources devoted to benefit fraud versus tax evasion. To sum up what my hon. Friend the Member for Bootle (Peter Dowd) said movingly about his constituency: the Government are indeed uninterested.
The hon. Member for Fermanagh and South Tyrone (Tom Elliott) mentioned geography and spoke about foster carers as an example of people trying to help their community who need face-to-face access. The hon. Member for Dwyfor Meirionnydd (Liz Saville Roberts) mentioned the difficulty that Welsh speakers are likely to have with the relocation to Cardiff. Finally, the hon. Member for East Kilbride, Strathaven and Lesmahagow (Dr Cameron) quite properly pointed out the lack of an impact assessment.
The context of this is that HMRC is embarked on something called “Making tax digital”. The Chartered Institute of Taxation says that that promises significant potential benefits but that HMRC’s resources should not be cut further
“before the full cost-savings that digitisation promises are being delivered.”
There is the rub. We see that under “Making tax digital” businesses will be required to update HMRC quarterly, via digital tax accounts. As the right hon. Member for Chichester (Mr Tyrie), the Chair of the Treasury Committee, said in a letter to the Financial Secretary this week:
“I understand that HMRC has recently clarified, for the first time, that businesses would be required not just to submit information to HMRC online once a quarter, but that they would also be required to do all their record keeping in a prescribed digital format.”
The Institute of Chartered Accountants in England and Wales—I suspect a similar situations pertains in Scotland and in Northern Ireland—found in its survey that 75% of all businesses and 82% of sole traders would need to change their record-keeping systems to comply with the Government’s new proposals for making tax digital.
As far as I can tell, HMRC is a mixed blessing on this—there is a mixed picture on digitisation. In a written answer to me on 1 February, the Financial Secretary to the Treasury said:
“HMRC’s Business Plan for 2016-17 is currently being finalised and will be published by the end of March 2016 on GOV.UK.”
That is an online publication, but unfortunately neither I, nor my excellent researcher, nor indeed the House of Commons Library, can find that document online. So if it is there, it is buried—not very good on digitisation there.
The office closures have been spoken about movingly today. They are happening all over the country and will make access for individuals much worse. We know that access by telephone has been appalling, although, to be fair to the Minister, with extra resources and extra staff, because of pressure from Opposition Members, that has improved somewhat. Again, the context of this is that we are trying to tackle tax avoidance, which we see in the Panama papers. HMRC staff are rushed off their feet now, so how are they going to deal with the fallout from the Panama papers? They are just not going to be able to do that. I would like the Minister to refer to that when he replies, because a similar situation applies in respect of the general anti-abuse rule that we hope we are going to have and to implement. I laud the Government on that, but staff will be required to enforce it; we do not have the enforcement if we do not have the staff.
The Office for Budget Responsibility made the following comments about the tax yield loss from Guernsey, Jersey and the Isle of Man:
“HMRC is also now less optimistic about how much of the lost yield can be recouped through additional compliance activity, on the basis that they are unlikely to be able to work the higher number of additional cases on top of existing workloads.”
The OBR estimates that HMRC will now recoup £530 million, which is down from a previous estimate of £1.05 billion. Talk about cutting off your nose to spite your face: cutting the number of staff and not being able to work the extra cases to get in the revenue. The staff would pay for themselves, and there are many, many studies to that effect.
All this comes coupled with a Government who have increased the size of the tax code by 50%. I understand that, as all Oppositions talk about simplifying taxation—it is the holy grail—but I am not aware of it happening in the 15 years since I first entered this Parliament. “Tolley’s Tax Guide” now runs to 1,500 odd pages, whereas it had 1,000 in 2010, so it is 50% longer. I am not saying to the Minister that we therefore need 50% more staff, but I think that most people would say, “If we are having more complexity rather than more simplification in tax, we probably need at least the same number of staff, with their expertise.” As it is, the number of staff in HMRC has plummeted in the past six years—some of this is a result of efficiency and some is because of digitisation.
Like all hon. Members, I suspect, I received a very helpful briefing from the Public and Commercial Services Union—PCS. I declare an interest, in that I am a member of the Unite trade union, and I am proud to be one. PCS represents more than 35,000 workers in HMRC, which is well over half the workforce, so I think PCS has some idea of what it is talking about. One thing it highlights is the lack of an equality impact assessment, which should have been done. There is anecdotal evidence—I stress that it is anecdotal—from London and the south-east of England that 40% of those being targeted who will not be able to transfer under this centralisation have disabilities. That may or may not be the case, but without that equality impact assessment we just do not know. Many staff with disabilities or with childcare or care for the elderly responsibilities will be disproportionately affected because the additional travel occasioned by centralisation—even if it is geographically possible which it is not in some parts of the country—will not be possible for them.
According to the PCS briefing, HMRC is not prepared to discuss the planned office closures with a recognised trade union, but it will discuss how those closures will be implemented. If that is the case, it is unacceptable. If that is really the Government’s view, they should put their money where their mouth is—I do not advise them to do this because it will be a lot more expensive in the long run—and de-recognise the trade union that represents more than half their staff, or they should comply with the spirit of the law and engage properly with a recognised trade union. They should have the one-to-one discussions, which were initially promised, but which are now being withdrawn in terms of having a union representative present. That is part of what union recognition is about—a person can have their union rep there when they have difficulties at work. The Government should be telling HMRC to do that.
HMRC is broadly going in the wrong direction. It is putting the cart before the horse. It is cutting staff—or proposing to cut staff—before there is any demonstration that digitisation is working smoothly. It should get it to work smoothly before it cuts staff.
Furthermore, making tax digital will increase costs for businesses, as they will have to put in information four times a year on new software and that will have a disproportionate effect on small businesses. With fewer staff, there is a reduced likelihood of success on tax avoidance and tax evasion, which, to be fair, the Government have done a lot about in the past six years, but they do need to do a lot more. These cuts will further restrict access to HMRC services for individuals and they will be further demoralising for a highly skilled workforce.
I say to the Government that there is a contradiction in what they are trying to do. Quite rightly, they are trying to make HMRC and its operations more efficient by using computers more. At the same time, they are saying that they need to centralise their offices. If computerisation works smoothly, they do not need to centralise geographically; they can do it in a dispersed manner, as is the case with the offices that we currently have, which the Government are proposing to close. I urge the Minister to think again.
Oral Answers to Questions
Rob Marris Excerpts(8 years, 2 months ago)
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Rob Marris (Wolverhampton South West) (Lab)
It was five years in office before we saw a productivity plan, and what happened last year? Productivity in the UK was 18 percentage points below the average for the rest of the G7. One sector that needs help is the UK steel industry. It needs more capital investment to be more competitive. How much money will the Government invest in steel in the next 12 months to improve productivity and save British jobs?
Greg Hands
The hon. Gentleman mentions the figure of 18 percentage points, and I refer him to an earlier answer in which I said productivity has been a long-standing issue in the UK. In fact, the figure was 17 percentage points back in the 1990s. As he well knows, the action we have taken on steel includes securing state aid to compensate for energy costs, securing flexibility over EU emissions regulations, ensuring that the procurement rules can also allow social and economic factors to be taken into account, and continuing to tackle unfair trading practices. The Government have been very active on steel, and that has not ended today.
Bank of England and Financial Services Bill [Lords]
Rob Marris ExcerptsTuesday 19th April 2016
(8 years, 2 months ago)
Commons ChamberRead Full debate Bank of England and Financial Services Act 2016 View all Bank of England and Financial Services Act 2016 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 19 April 2016 - (19 Apr 2016)
Harriett Baldwin
Okay, the hon. Gentleman wants to hear more. In the July 2015 Budget we confirmed an extra £800 million investment to fund additional work to tackle evasion and non-compliance. HMRC’s specialist offshore unit is currently investigating more than 1,100 cases of offshore evasion around the world, with more than 90 individuals subject to current criminal investigation. Even before last week, HMRC had already received a great deal of information on offshore companies, including in Panama, and including Mossack Fonseca. This information comes from a wide range of sources and is currently the subject of intense investigation.
We are going further by providing new funding of up to £10 million for an operationally independent cross-agency taskforce. It will include analysts, compliance specialists and investigators from across HMRC, the National Crime Agency, the Serious Fraud Office and the Financial Conduct Authority. It will have full operational independence and will report to my right hon. Friends the Chancellor and the Home Secretary.
Of course the FCA has a role to play. Its 2016-17 business plan states that the fight against financial crime and money laundering is one of its priorities. Its rules require firms to have effective systems and controls to prevent the risk that they might be used to further financial crimes. That is why the FCA has written to financial firms asking them to declare their links to Mossack Fonseca. If it finds any evidence that firms have been breaking the rules, it already has strong powers to take action. However, it is HMRC that is ultimately responsible for investigating and prosecuting offences associated with tax evasion.
Finally, with regard to trusts, we believe that we have secured a sensible way forward by ensuring that trusts that generate a tax consequence in the UK will be required to report their beneficial ownership information to HMRC. By focusing on such trusts, we are focusing on those where there is a higher risk of money laundering or tax evasion, which arise when trusts migrate or generate income or gains, and minimising burdens on the vast majority of perfectly ordinary and legitimate trusts.
Although I appreciate the spirit with which the new clause has been tabled, I do not believe that it would be appropriate to change the role of the FCA or the PRA, so I urge the hon. Member for Leeds East not to press the new clause.
Question put and agreed to.
New clause 9 accordingly read a Second time, and added to the Bill.
New Clause 14
Combating abusive tax avoidance arrangements
“(1) Section 3B of the Financial Services and Markets Act 2000 (Regulatory principles to be applied by both regulators) is amended as follows.
(2) At the end of subsection (1) insert—
(i) combating abusive tax avoidance arrangements.
(a) in observing principle (i), the regulators must undertake, in consultation with the Treasury, an annual review for presentation to the Treasury into abusive tax avoidance, including measures to ascertain and record beneficial ownership of trusts using facilities provided by banks with UK holding companies or entities regulated by the Bank of England or the FCA, control of shareholders and ownership of shares, and investment arrangements in an overseas territory outside the UK involving UK financial institutions.
(b) in this section “beneficial ownership of trusts” includes ownership of any equitable interest in a trust including being an object of a discretionary trust, power of appointment or similar arrangement as well as any vested interest under a trust;
(c) “control of shareholders and ownership of shares in companies using facilities provided by banks with UK holding companies or entities regulated by the Bank of England or the FCA” shall include control by any person with control over a voteholder in a company as defined in Part VI Official Listing s.89F of the FSMA (2000) as applied mutatis mutandis to this context, whether directly or indirectly, and whether alone or in concert with some other person.””—(Richard Burgon.)
Brought up, and read the First time.
Question put, That the clause be read a Second time.
Finance (No. 2) Bill
Rob Marris ExcerptsMonday 11th April 2016
(8 years, 2 months ago)
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Rob Marris (Wolverhampton South West) (Lab)
Well, the Chancellor has seen a small fraction of the light. The Bill contains some measures to support industry and some measures to crack down on tax avoidance, as well as the Government’s long overdue but welcome commitment to zero-rating VAT on women’s sanitary products, a cause long championed by my hon. Friend the Member for Dewsbury (Paula Sherriff). The Government have also accepted our amendment to the Budget resolution to legislate on energy-saving materials. It is, however, unfortunate that those provisions are not in the Bill, which is leading to continuing uncertainty. I welcome the creation of 2 million jobs in the United Kingdom since 2010, but those jobs have been bought on a sea of debt.
The Government talk about the simplification of taxes, as they did when they were in opposition. Tolley’s Tax Guide has grown by 50% under the present Chancellor, the Finance Bill contains 827 pages, and, according to the National Audit Office, there are about 1,300 tax reliefs and the Government have some idea of the efficacy of fewer than 300 of them.
Before dealing with the Bill in more detail, I want to say something about the deteriorating economic context in which it is being introduced. We have heard some of the figures during today’s excellent debate, but I think it is worth reminding ourselves of them. The current account of the balance of payments worsened to a record deficit of 5.2% of GDP in 2015. The Chancellor rightly wishes to encourage individuals to save more, yet the household savings ratio has plummeted, and is worse than it was at the time of the 2008 economic decline. In the last quarter of 2015, productivity was 1.2% lower than it had been in the previous quarter—the steepest drop since 2008. UK productivity is 18 percentage points below the average in the rest of the G7.
Household debt is on its way back up, and the Office for Budget Responsibility forecasts that by 2020 it will be at about the same level as it was in 2008. Since 2010, median weekly earnings, in real terms, have fallen by more than 5%, and public spending has fallen by more than 10%. The national debt has risen by nearly two thirds in just six years. The annual deficit is the second highest in the G7, and last year it was worse than the one in Greece. In March, the OBR revised its projections for GDP growth downwards, and revised its estimates for UK debt upwards. Let us not forget that the Chancellor has missed two of his three self-imposed fiscal targets, and the OBR estimates that his chances of hitting the third are about 50:50.
After six years in charge, it is about time the Chancellor took some responsibility for his many and manifest failures. The evident economic mistakes made by the previous Labour Government, for which I have repeatedly expressed my deep regret in the House, are almost as nothing when compared with the Chancellor’s rotten record. The Chancellor does not learn. For example, he has put the income tax rise threshold for tax credits back to what it was initially under the Labour Government when it wreaked havoc on working families, and it has wreaked havoc on the Treasury. Labour learns from its experiences and its mistakes; the Chancellor evidently does not.
The Institute for Fiscal Studies says that the direct effect of Government tax and benefit policy has been to take money from working age benefit recipients towards the bottom of the income distribution. The Chancellor planned to cut disability benefits for some of the most vulnerable and he will make some of the poorest struggle to repay tax credit debts, yet he is introducing cuts to capital gains tax, costing £2.7 billion by 2021, and cuts to corporation tax despite the rate already being the joint lowest in the G20. He believes in cutting the incomes of the most disadvantaged in our society while increasing the wealth of his rich friends. He says that we are “all in this together”. I think not.
It is unfair that the adverse effects of the Government’s harsh economic policies fall most heavily on women. House of Commons Library figures indicate the gender bias of benefit changes. Some 86% of cumulative tax changes and cuts in social security benefits spending due between 2010 and 2020 will come from women. That does not even include the swingeing cuts to public services, let alone the impact of universal credit.
The Panama papers demonstrate the widespread problem of tax havens and of the lengths to which some of those who can afford it will go to avoid tax. The Government’s repeated promises over the past six years to tackle tax avoidance have been shown to be largely hot air. After all, the UK, along with its overseas territories and Crown dependencies, remains the biggest secrecy jurisdiction in the world, and the British Virgin Islands are by far the most popular tax haven revealed by the Panama papers. While containing a few, limited anti-avoidance measures, this Finance Bill will do nothing fundamentally to fix that. By not acting, we damage our own economy, but we also damage some of the poorest people on earth.
In July 2015, the Financial Secretary said that he expected the UK’s overseas territories with financial centres to set out a timeline for introducing registers of beneficial ownership or similarly effective systems by November 2015. Despite the timeline not being met, the UK Government had not even expressed their disappointment until recently. Of 10 overseas territories and Crown dependencies, only two have accepted the Prime Minister’s request to adopt a public register of beneficial ownership. The measures announced now, including a £10 million taskforce and a new criminal offence—conspiracy to evade taxes—for something that is already a criminal offence, are too little, too late. The Financial Secretary to the Treasury told us today that Crown dependencies have agreed to provide full access to a register of beneficial ownership, but that will mean a central register kept by those territories, not a public register, which is what we need. When will the Government take serious action and when will the Government take some responsibility?
The Chancellor is borrowing like a drunken sailor, using the nation’s credit card to pay the day-to-day bills, which is just plain wrong and will end in tears. Borrowing to invest in infrastructure is fine. It is like borrowing on a mortgage to buy bricks and mortar. That is what Labour would do. We advocate capital investment in mass house building because we have a housing crisis in this country that has got much, much worse in the past six years. The measures in this Bill will do far too little to address that housing crisis. I am a socialist who spent most of his working life in business, and I understand the laws of supply and demand, but apparently this Tory Chancellor does not. Let me spell it out for him: increase the supply of housing. To address the housing crisis caused by insufficient supply, the Government should themselves build more housing.
This Chancellor should stop wringing his hands and blaming the last Labour Government. He has been in office for six years now and it is high time he took some responsibility. This Finance Bill is palpably inadequate. In failing to address the severe challenges facing our country, this Government and this Chancellor are failing all of us, but they are particularly failing the next generation. I urge all Members to vote against Second Reading tonight.
Section 5 of the European Communities (Amendment) Act 1993
Rob Marris Excerpts(8 years, 2 months ago)
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Rob Marris (Wolverhampton South West) (Lab)
I have to say that I have some sympathy with the hon. Member for Stone (Sir William Cash) and the right hon. Member for Wokingham (John Redwood). I draw the House’s attention to the wording of the motion, which states:
“That this House approves…the Government’s assessment as set out in the Budget Report and Autumn Statement”.
Even the Chancellor of the Exchequer does not accept the assessments made in the autumn statement, yet we are now going off to Brussels and—if the motion is passed; I hope it is not—saying that we accept them.
I hope you will give me a little latitude, Mr Speaker, because I would like to start by setting the scene of where we are with our economy and looking at some of the history behind it. We must look at credibility. In the 2015 general election, Labour lacked economic credibility and people voted accordingly. It is true that most of the economic meltdown in the UK in 2008 was due to world factors such as the Lehman Brothers collapse and so forth. Let me try, however, to dispose of the myth to which some in Labour still cling—namely, that there were no real problems with the UK economy when the world economic meltdown occurred in 2008 and that all Labour’s economic problems thereafter were due solely to world factors.
That analysis is just plain wrong, and most people know it. Most voters know that the Labour Government did great things to improve our society and our economy, but voters also know that Mr Gordon Brown made some fundamental economic mistakes—for example, the nonsense of his slogan “an end to boom and bust”, his light-touch regulation of the financial services sector, the disaster of the private finance initiative, and large deficits in the good times. Just before the world meltdown, the UK annual deficit was 3.1% of GDP.
As I have said in the House before, Mr Brown arrogantly ignored the warnings that some of us gave him well before the crash. I am angry and sorry that he made those mistakes, because they meant that the UK economy was not as well placed as it should have been before the world crash. Even without them, the UK’s defences would have been overtopped when the financial tsunami came across the Atlantic, but not by so much. Today, our economy faces what the current Chancellor has described as world headwinds, and because of the current Chancellor’s own mistakes the UK is far worse placed to withstand those headwinds than it was in 2008, when the world tsunami hit. The national debt expressed as a percentage of GDP, for example, is far higher than it was in 2008, and it is now rising.
Sir William Cash
In the light of the strictures that the hon. Gentleman has imposed on his former Prime Minister, may I just mention that the national debt, which is currently regarded as being about £1.5 trillion, rises to between £3 trillion and £4 trillion if, for instance, Network Rail and the pension liabilities are taken into account? Does the hon. Gentleman accept that that is the real position?
Rob Marris
Network Rail should be included; future pension liabilities should not.
The Chancellor is fond of saying that the current Government and the last coalition Government have fixed the roof while the sun was shining, and that Labour failed to do so. Well, only 20% of infrastructure projects have been started over the last six years. Under Labour Governments we had many more hospitals and schools, and we also had the £12 billion decent home programmes for doing up social housing. As a result, there was a great deal more social housing, including housing association and council properties, than there has been under the current Conservative Government and the coalition.
I welcome the creation of 2 million more jobs since 2010—that is the jewel in the Chancellor’s crown—but it has been bought with a sea of debt, a point to which I shall return. The proportion of part-time workers in the work force has remained broadly the same for the last 10 years, but there is concern about the growth of zero-hours contracts, although I must say that that concern is sometimes overblown. There is also concern about regional imbalances between London and the rest of the country, although I am pleased to say, as a west midlands Member, that they have lessened somewhat in the last two years. However, according to the Office for National Statistics, median gross weekly earnings in the United Kingdom fell by about 4.5% in real terms under the coalition Government.
A theme of the Chancellor’s Budget statement was
“We choose to put the next generation first.”—[Official Report, 16 March 2016; Vol. 607, c. 951.]
What happened about student fees and loans in England? What happened about the abolition of the education maintenance allowance in England? What happened about the spiralling cost of housing in the last six years because the Government singularly failed to address that issue, thereby increasing intergenerational imbalance? What happened about this Government’s selling of a record amount of state assets this year? Those assets could have gone to the next generation. What happened about this Government’s carrying on with the disastrous policy of PFI? And what happened about the deficit and the national debt?
We were told that the deficit was not going to be eliminated by 2015. Well, these things happen. Is it going to be eliminated by 2020? Barely any commentators besides the Chancellor of the Exchequer himself believe that. The Financial Secretary to the Treasury says this evening that we are doing better than other member states. I have to tell him that that is not true. In the G7, for example, our deficit compared with those of the other seven states is the sixth worst; only that of Japan is worse. In 2014, the deficit in Greece—poor old meltdown Greece—was less as a proportion of GDP than the deficit in the United Kingdom. In 2015, according to the International Monetary Fund, they will be the same. That is not a great example to set.
The changes, positive as they may be, with some anaemic growth and considerable growth in employment, have been bought on a sea of debt. Government spending is out of control. Let us look at the national debt. I am grateful to the economist Richard Murphy for providing me with these historical figures. In 2014 prices, the average borrowing by Labour Governments for each year in office since the war was £26.8 billion. The figure for Conservative Governments was £33.5 billion. The average borrowing, in 2014 prices, for each year in office excluding the period since the world crash in 2008—it could be argued to be unfair to the last Labour Government and the Conservative-led Governments to include that period—was £17.8 billion for Labour Governments and £20.6 billion for Conservative Governments.
Let us look at the percentage of years in which debt was repaid by Governments since the war. Part of the national debt was repaid in a quarter of post-war Labour Government years; the same happened in 10% of Tory Government years since the war. Let us now look at the total repayments of the national debt made by respective Governments, in 2014 prices. Conservative Governments have managed to pay off £19.9 billion of the national debt. Labour Governments, who have far more economic credibility, have paid off £108.8 billion. This Government’s spending is out of control. The national debt is up two thirds in six years, and this year it is forecast to increase slightly as a percentage of GDP.
It is a good thing that Mr Brown kept the United Kingdom out of the euro. Had he not done so, we would be in special measures big time under the terms of the growth and stability pact. The treaty defines excessive budget deficits as those that are greater than 3% of GDP. The current Chancellor has failed that test six years running, and on current forecasts—they could of course change next week—he is set to scrape in under the wire at 2.9% this year. The other element of the definition of excessive budget deficits under the growth and stability pact is that public debt is considered excessive if it is greater than 60% of GDP. It should also be falling by 5% per year on average over a three-year rolling period. The current Chancellor is on track to fail that test 10 years running.
The Chancellor is borrowing on the credit card to pay the day-to-day bills. He is also borrowing on a mortgage to buy bricks and mortar. That is fine for infrastructure— that is what Labour would do and it is what many families do. We borrow on a mortgage to pay for the bricks and mortar, but we should not borrow on the credit card to pay the day-to-day bills.
This Chancellor has been in office for six years and it is time that he took some responsibility. Frankly, it is wearisome, juvenile and harmful to our economy to keep blaming the previous Labour Government. I urge all Members of the House to vote against the motion tonight.
Several hon. Members rose—
Budget Resolutions and Economic Situation
Rob Marris Excerpts(8 years, 2 months ago)
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Chris White (Warwick and Leamington) (Con)
A number of measures in this Budget will have a positive impact on smaller businesses, and it is absolutely right that we continue to stimulate growth in the size and number of small and medium-sized enterprises as they have undoubtedly been a key contributor to a strengthening economy, both locally and nationally.
The midlands is vital to our economy, and I am pleased that the Government—
Chris White
And Opposition Front Benchers are generous enough to recognise it as such.
Some 96,000 more businesses have been formed in the midlands since 2010, which amounts to about 52 a day. The announcement of the midlands engine investment fund, which will see more than £250 million invested in smaller businesses across our region, will be a boost for the local economy and will go some way to ensuring that the progress made in recent years is built upon.
It is worth recognising the tremendous impact that the reform of business rates will have. As the Chancellor outlined on Wednesday, it will mean that 600,000 businesses will pay no business rates at all. The Federation of Small Businesses has said that its members welcome this as an “important step”, and I echo that sentiment. The further cut in corporation tax to 17% by 2020, the freeze on fuel duty, and the action on VAT on overseas firms to create a more level playing field are all welcome measures.
We must not lose focus, however, on enterprise policy and the idea of the “march of the makers”, which is particularly relevant. Manufacturing is key to the midlands and an important aspect of rebalancing our economy. As co-chair of the all-party group on manufacturing and a member of the Business, Innovation and Skills Committee, I have worked closely with industry to discuss and hear about some of the challenges that it faces. High-value manufacturing catapult centres have been a revelation, and I am pleased that the Government continue to back them, with more than £200 million of investment since 2011 and an increase in financial support in the latest autumn statement. Fostering an environment in which innovation thrives has to be a priority when thinking long-term, and these catapult centres, which bridge the gap between businesses, academia and some of the UK’s world-class research centres, are instrumental in achieving that. However, such action must be matched by a supply of skills, and apprenticeships are of huge significance. In my constituency, Warwick Trident College works with industry—it partners with industry—and is providing hundreds of students with the necessary skills to succeed. Empowering further education colleges to extend the provision of tailored courses should be an important part of the Government’s future apprenticeship agenda.
Another underestimated sector is video games, which contributes a huge amount to our economy, not least in my constituency. There is no doubt about the value of the games industry to the economy: we are talking about £1.4 billion in gross value added, support for 23,900 jobs nationally and the generation of £429 million in tax receipts. We must continue to support this very important sector.
Draft Income Tax (Construction Industry Scheme) (Amendment of Schedule 11 to the Finance Act 2004) Order 2016
Rob Marris Excerpts(8 years, 3 months ago)
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Rob Marris (Wolverhampton South West) (Lab)
It is a pleasure to appear before you, Ms Dorries—it is a pleasure I have not previously had.
Naturally, Labour shares the Government’s goals of reducing unnecessary administrative burdens on business and of helping small businesses, and they are the focus of the order. I look around the room, and one or two of my hon. Friends are old enough to remember the lump in the construction industry that existed when I entered the labour force. We then had the 1971 construction industry tax deduction scheme. I did not remember the dates, so I looked them up, but from April 1977, we had the old 714 certificates, the 715 vouchers and SC60s and so on. I remember learning about them in law school. We then had the construction industry scheme, which today’s order seeks to amend and which began in August 1999.
At that point, the turnover threshold was £30,000, as the Minister will remember. The scheme was then reformed. The reforms took some time to come through, but they began in April 2007, so here we are almost nine years on making another amendment. The Minister will be relieved to hear that, as part of the research that my excellent researcher, Imogen Watson, and I undertook we spoke to the Union of Construction, Allied Trades and Technicians—UCATT—which does not have concerns about the instrument, and that shortened the research time I felt it necessary to spend on the instrument.
I understand that the statutory instrument is one of a series of five or possibly six. It seems to be the fifth in a list in the tax impact note of 10 December 2014, although it is the fourth to be passed. I gather that there will be another statutory instrument that reduces the turnover threshold for eligibility for the scheme from £200,000 to £100,000. Perhaps the Minister would say a couple of words about that, or correct me if it has already happened. Perhaps he would kindly confirm when the missing SI—the other one on the list of five—will be placed beside the turnover-reducing one. I understand that it will be next month.
My understanding is that the statutory instruments are part of a wider HMRC and Treasury plan to introduce mandatory online filing for construction industry scheme contractors and, in that sense, the free online software and pre-populated forms have been useful to small businesses, as the helpful Library note from 2011 indicates. I found intriguing what the tax impact note says about the fact that some people do not wish to do online filing on religious grounds. I concede that that was a new one to me—that is my ignorance. Perhaps the Minister would elucidate it a little for me and, I suspect, some other hon. Members. It is slightly concerning when we are trying to move to a more efficient online system, but people’s religious beliefs have, of course, to be respected, and the Government are doing that.
In the tax impact note of 10 December 2014, two figures seem to be given for the number of businesses affected—90,000 and 40,000. I think that the Government anticipate that it is the latter figure that will be affected by the package of measures, including today’s statutory instrument, but perhaps the Minister would clarify that. If the figure is not 40,000, perhaps he would say what the Government estimate it to be.
I realise that the explanatory notes do not form part of the statutory instrument, but they say that the tax impact note of 15 months ago still holds good:
“It remains an accurate summary of the impacts that apply to this instrument.”
However, the still-effective tax impact note itself says on page 3:
“Estimates of the impact on businesses will be established and published once details of the measure have been finalised.”
Would the Minister tell us whether those estimates have been established and published? I have not been able to find them, but that might be to do with my research capabilities.
On the same page, the note refers to the costs of the changes:
“HMRC will incur costs to make changes to, or introduce new, IT systems to enable improvements to the CIS scheme.”
Would the Minister tell us whether the package of statutory instruments and measures to change the CIS scheme will lead to a need for new IT systems or alterations to existing ones, and what the costs are likely to be?
Naturally, when any Government introduce changes to a scheme, at a certain point thereafter they ought to make an assessment of the effectiveness of the scheme and the changes, and whether they have produced the desired outcome. Would the Minister say when the Government might be able give an indication of the effectiveness or otherwise of the changes made—a year down the road, two years down the road, and so on? As I said earlier, the scheme has been changed quite a lot over the years. In that context, what would be the Government’s measurement or, as we say these days, metric for success in terms of whether the package of changes has produced broadly the types of improvement for small businesses that we all want?