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Clause 1 — Main rate of corporation tax for financial year 2011

Part of Finance Bill – in the House of Commons at 5:45 pm on 12th July 2010.

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Photo of Stephen Timms Stephen Timms Shadow Financial Secretary, Shadow Minister (Digital Britain) 5:45 pm, 12th July 2010

HMRC, for which I was responsible, has a very difficult task on its hands. I was persuaded, and remain convinced, of the case for HMRC being able to discharge its functions a good deal more efficiently in the future, thanks to the use of new systems and to a reorganisation into larger groups. In the past, HMRC was characterised by lots of offices with not very many people working in them. It is now clear that that was not very efficient or effective, and I think that the reorganisation will help. There is no escaping the fact that it has a tough job to do, but I think that it is setting about it in the right way.

The financial crisis since 2008 has led to a big shift in the approach to tax evasion and tax avoidance. Following the crisis, the previous Government made certain that the UK was at the forefront of the drive for change. Internationally, there was recognition that a lack of transparency in the international financial system had presented previously unrecognised but nevertheless significant systemic threats to the global financial architecture, that those threats had to be dealt with and that progress had to be made quickly. In the forum of the G20 and in the aftermath of the credit crunch, good progress was made, but that momentum needs to be maintained. I hope that the Minister will set out for us today how he sees it being maintained.

The previous Government measured the tax gap and published for the first time an assessment of it and a detailed breakdown of how it was made up. My hon. Friend the Member for Hayes and Harlington rightly referred to the £40 billion figure as the overall assessment, and a detailed breakdown of it was published at the time of the Budget in a document called "Measuring Tax Gaps". I hope that the Minister will tell us that it is his and the Government's intention to publish this assessment regularly, and I hope that my hon. Friend will be reassured by that.

The figure in that analysis for corporation tax as a contribution towards the overall £40 billion gap is £8.9 billion, which is 16% of the total corporation tax-a very significant contribution. Indeed, 16% is one of the largest of the direct tax losses, although it is not quite as much a loss as that from diesel duty in Northern Ireland or hand-rolled tobacco duty. Apart from those, however, the proportion of corporation tax not being collected is the largest of the taxes set out in the analysis.

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