Tax Avoidance and Multinational Companies

Robert Jenrick Excerpts

Wednesday 3rd February 2016 Commons Chamber

[John McDonnell]

I know that the hon. Lady was not here at the time, so perhaps she should check my voting record throughout my 18 years in this House. I do not want to keep on repeating this. I wanted both Governments to go further, but an independent assessment has shown that the legislation introduced by the previous Labour Government will drag in 10 times more in tax than the current Government’s legislation, and even then I wanted to go further. We should at least accept the independent assessment that has been made.

[Robert Jenrick (Newark) (Con)]

rose—

[John McDonnell]

I am going to press on, because time is short.

I have written to the Competition Commissioner to request a formal investigation of this deal. There was a visible flicker of life from the Chancellor a few days ago. In the pages of Monday’s Financial Times he let it be known that he might, after all, favour country-by-country reporting for multinational corporations. Tax experts and campaigners and I have long argued that this is a vital step towards transparency, and therefore towards fair collection. By revealing in their accounts in which tax jurisdiction their revenues were earned, a proper rate of tax can be applied to multinational companies. If the Chancellor now supports country-by-country reporting, I welcome that. However, the impression was given that even without international agreement the Government would act. Is this the case, or was it just a publicity stunt that has now been dropped?

My hon. Friend the Member for Leeds West (Rachel Reeves) referred to Bermuda. On the “Andrew Marr Show” on Sunday a senior Google representative revealed that the company has £30 billion of profits resting in Bermuda, a British overseas territory. This is in order to avoid US tax rates. We now know that the Chancellor has been lobbying the EU and instructing his MPs to vote against anti-avoidance measures against Bermuda. It is a disgrace.

It was also revealed last week that Government Ministers have met Google 25 times over the past 18 months. I note that the Prime Minister himself has spoken at Google’s conference not once, but twice. If Ministers are to meet anyone, my advice is that they go and meet the trade union representatives of HMRC staff. With almost half the workforce having been laid off, and with offices having been closed across the country, it is widely known that morale is at rock-bottom, especially with the loss of highly experienced and expert staff. [Interruption.] Madam Deputy Speaker, a reference has just been made to declaring an interest. I have no interest to declare. I think that was a reference to the Public and Commercial Services Union and part of its trade union group. It does not fund the Labour party or my constituency. There is no interest to be declared.

We cannot allow the Government to go on like this. Trust and confidence in our tax system is being undermined. Every pound in tax avoided by these large corporations is a pound taken from the pockets of honest taxpayers. It is also a pound not spent on our schools, our NHS and our police. We need a real tax reform agenda, based on the principle of complete openness and transparency. First, that means, as a start, the publication of the details of this deal in full, so that we and our constituents can judge whether it is fair enough. Secondly, we need real country-by-country reporting of a company’s activities, and not just a secret exchange of information between tax authorities, but full publication so that we can all judge.

--- Later in debate ---

[Mr Gauke]

The controlled foreign companies regime was driving business out of the UK, whereas now businesses are looking to locate their headquarters in the UK, and I am pleased about that.

[Robert Jenrick]

The Minister is making a very important point about the diverted profits tax. It is important that Members on both sides of the House recognise that this extremely important development was brought in by this Government, and that it is not correct to say that Labour Members supported it, because at the time, a year ago, their position was that it was not wise to bring it in until the BEPS process was completed, which it still is not. Had we taken the advice of the then shadow Chancellor and shadow Chief Secretary, there would be no diverted profits tax, and the points made by Labour Members would be irrelevant.

[Mr Gauke]

I am grateful to my hon. Friend, who reminds the House of an important point. When we brought in the diverted profits tax, the intention was clearly to make sure that we got more money being paid in corporation tax. We want to stop companies diverting their profits out of the UK, and we are leading the way in bringing forward legislation on this.

Let me address the shadow Chancellor’s point about resources for HMRC. We have invested heavily in HMRC’s ability to strengthen its anti-evasion and compliance activity, including through extra funding and hiring professionals whose area of expertise is multinational companies. For example, contrary to the impression that he gave, the number of people working in HMRC’s large business directorate has gone up, since it was formed in 2014, from 2,000 to 2,600 people. We believe in competitive taxes—that is why we have cut our rate of corporation tax so that it is the lowest in the G7—but we also believe in making sure that those taxes are paid.

I turn to the issue of transparency raised by several hon. Members. Taxpayer confidentiality is a fundamentally important principle of our tax system, as in the tax systems of every other major economy. We hear complaints that HMRC is not disclosing full details of the settlement. HMRC is prevented by law from disclosing taxpayer information. The resolution of tax disputes, however, is subject to full external scrutiny by the independent National Audit Office, which has reviewed how tax inquiries are concluded by HMRC. In 2012, it appointed a retired High Court judge, Sir Andrew Park, to investigate HMRC’s large business settlement process. Sir Andrew concluded that all the settlements he scrutinised

“were reasonable and the overall outcome for the Exchequer was good.”

I do wish that those who are so keen to accuse HMRC and its staff of sweetheart deals were as keen to look at what happens where independent scrutiny occurs in order to see that in fact there are no sweetheart deals. HMRC introduced—