Tax Avoidance and Multinational Companies

Wes Streeting Excerpts

Wednesday 3rd February 2016 Commons Chamber

[Mr Gauke]

We have a very open and transparent arrangement for disclosure of meetings. I am very clear that when it comes to determining the tax liability of a company such as Google—or, indeed, any other taxpayer in this country—there is no ministerial involvement. HMRC is entirely operationally independent. There is no ministerial interference in such areas, and no suggestion that there would be. When it comes to determining the tax bill of any taxpayer, it is a matter of HMRC enforcing the law; it is not for ministerial involvement. HMRC introduced new governance arrangements for significant tax disputes in 2012 to provide even greater transparency, scrutiny and accountability. They included the appointment of a tax assurance commissioner to ensure that there is clear separation between those who negotiate and those who approve settlements. The tax assurance commissioner oversees the process and publishes an annual report on his work.

Let me be absolutely clear. There are no sweetheart deals, and there is no special treatment for large businesses. HMRC resolves disputes by agreement only if the business agrees to pay the full amount of tax, penalties and interest. Otherwise, it is a matter for the courts—an arena in which HMRC has a strong track record of fighting and winning.

[Wes Streeting (Ilford North) (Lab)]

I am grateful to the Minister for his assurance that there are no sweetheart deals, but if the process is so independent and Ministers are so far removed from it, how can he give us that assurance? Similarly, how was the Chancellor able to hail the deal as a major success?

[Mr Gauke]

We have in place strong governance. The NAO has looked in the past at settlements when accusations have been made of sweetheart deals, and those accusations have been dismissed. It is very clear that HMRC’s remit is to get the tax that is due under the law, and no one has ever produced a shred of evidence to suggest otherwise; they have merely displayed a prejudice against HMRC staff and a tendency to insult them.

--- Later in debate ---

[Wes Streeting (Ilford North) (Lab)]

I am grateful for the opportunity to speak in this debate. As someone who represents a constituency containing thousands of business, of all shapes and sizes, many of which feed into the national supply chain, I wish to say at the outset that I am very proud of the role that not just my constituency, but this country plays, with many of our leading industries leading the way globally. I want this country to be a good place to do business and to set up a business, and to continue to lead the world with competitive tax rates.

This debate is actually about fairness and transparency. To follow up something that the hon. Member for Croydon South (Chris Philp) said, the fact is that the Minister could not tell us last week what effective tax rate Google would be paying. I can tell him what the effective tax rate is for businesses in my constituency—what rate of corporation tax they will be paying—so why is it so difficult for Google, a multinational giant, to be transparent with the public about the rate of tax it is paying?

[Mr Gauke]

Just to be clear, the statutory rate is 20% and that applies to everybody. There are businesses that will have a lower effective rate, entirely lawfully and in accordance with the spirit of the law, because, for example, they make use of capital allowances or they might have losses that they are making use of. Someone having an effective rate below the statutory rate does not mean that they are conducting avoidance activity.

[Wes Streeting]

That is a fair point, but of course many tax experts have estimated that Google is paying an effective tax rate of 3%. If that is not the case, we need to see the numbers that give us that assurance. We do not doubt the difficulties here. In an increasingly globalised world, where intellectual property and the growth of internet companies makes this more important in the debate about tax, these are difficult issues to grasp, but there is no hint of fairness or transparency about this deal, and that is what we are seeking with this debate.

We would have more confidence if there had been consistent messages on this issue from both the Government and Google. On 23 January, the Tory Treasury Twitter account—not the most accurate of sources—claimed that the

“Google tax bill is for years 2005-2011, almost all under Labour”.

Yet Google Ltd’s account for the period ended 30 June 2015 reported

“a liability to HMRC of £130 million in respect of additional taxes and interest due for prior accounting periods and the current accounting period.”

The Minister says that there has been no sweetheart deal, but, as I asked him earlier, how can he give us that assurance if he has not seen the deal and is as far removed from it as he says. The Chancellor said it was a “major success”. How can he laud it as a major success if he is not close enough to the deal? If it is such a major success, why did the Prime Minister in Downing Street run so far away from that claim? Why has the Financial Secretary to the Treasury not once in recent weeks stood by his Chancellor in saying that this deal is a major success? I believe that it is because he knows that it is nothing of the sort, and that this Government look deeply out of touch with the public.

Labour were accused of attacking HMRC staff. The fact is that HMRC has a responsibility to apply tax law. It has a duty to go for the full rate of tax due, but, as my right hon. Friend the Member for Barking (Dame Margaret Hodge) pointed out, it has not always applied that duty. I am sure that, following the work of the Treasury Committee and the Public Accounts Committee, we will find that the issue at HMRC is to do with resourcing and extra teams and whether there are the people and the capacity to pursue not just the current claims and outstanding tax, but the historical backlog that exists as well.

Also of concern is the fact that Google itself has made some rather odd claims. On the one hand, we see senior Google executives writing to the newspapers about how great the deal is and how they have stood by their obligations, while, on the other, they are committing to paying more tax in the future. What is the reality? Is it that Google is paying the tax liability that is due; that it has somehow got away with it and plans to pay more in the future; or that it sees tax as a means of charity towards the state and it is willing to prop up the Treasury coffers a bit more generously in the future? Whatever the reality, there is deep inconsistency in the messages from the Government and Google.

We should look at the comments recently made by the Mayor of London who went as far as to suggest that finance directors have a fiduciary duty to minimise tax exposure. That cannot possibly be the case. If the Mayor of London looked at the duties under the Companies Act 2006, he would see that they also have to make reference to

“the likely consequences of any decisions in the long term…the company’s business relationships with suppliers, customers and others”—

and—

“the impact of the company’s operations on the community and the environment”.

There is a problem with the ethos of those on the Conservative Benches. Many of them see tax as a form of theft, whereas we see it as a civic responsibility and duty and as a means of creating a more civilised society. I want businesses in my constituency to pay their fair share of tax, and indeed they do. It is not unreasonable to expect a multinational company such as Google to do the same. The Government need to do much more to ensure that there is transparency for all such companies in all of the jurisdictions in which they operate.