Tax Avoidance and Evasion

Oral Answers to Questions — Treasury – in the House of Commons at 12:00 am on 17 April 2018.

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Photo of Alex Chalk Alex Chalk Conservative, Cheltenham 12:00, 17 April 2018

What progress has been made on reducing tax avoidance and evasion.

Photo of Nigel Mills Nigel Mills Conservative, Amber Valley

What progress has been made on reducing tax avoidance and evasion.

Photo of Philip Hammond Philip Hammond The Chancellor of the Exchequer

Since 2010, Her Majesty’s Revenue and Customs has secured more than £175 billion that would have gone unpaid and introduced more than 100 new measures to crack down on tax avoidance, tax evasion and other forms of non-compliance, so that the tax gap is now at a record low, and one of the lowest in the world, at 6%.

Photo of Alex Chalk Alex Chalk Conservative, Cheltenham

It is extremely encouraging that the UK tax gap is at a record low, but it appears that multinationals are trying to run rings around HMRC, so will my right hon. Friend outline what further steps the Government are taking to build on that excellent success?

Photo of Philip Hammond Philip Hammond The Chancellor of the Exchequer

I am grateful to my hon. Friend for raising this issue. It is a great achievement to have got the tax gap down to one of the lowest in the world, but we are not complacent. We are currently calling for evidence on whether online platforms should play a greater role in ensuring tax compliance by their users; we are consulting on an innovative split payment method to tackle online VAT fraud; and we will continue to lead in the G20 and other forums on seeking agreed multilateral solutions to the challenge of where and how to tax global digital companies, which are particularly difficult to tax under the current system.

Photo of Nigel Mills Nigel Mills Conservative, Amber Valley

I echo the praise for HMRC’s performance in tackling tax avoidance and evasion over recent years. Is the Chancellor becoming more convinced of the importance of having public country-by-country reporting, so that not only HMRC but customers and campaigners can see where multinationals are making their profit? That way, we can make sure that they are paying the right tax in the right countries.

Photo of Philip Hammond Philip Hammond The Chancellor of the Exchequer

As my hon. Friend will know, the UK was one of the first countries to implement the OECD model for country-by-country reporting to tax authorities. Those reports have been required for periods that started on or after 1 January 2016. On public reporting, the Government are committed to a multilateral approach to ensure that reporting provides comprehensive information and is fair between UK-headquartered and non-UK-headquartered multinationals. We are engaging constructively on the EU proposals for public country-by-country reporting, which we see as a step in the right direction.

Photo of Vincent Cable Vincent Cable Leader of the Liberal Democrats

The Chancellor will be aware of President Macron’s proposal for taxing the revenue of the big internet platforms, which the Chancellor acknowledges are difficult to tax under the existing rules. Are the Government considering building on the entente cordiale of recent days by co-operating with and learning from the French model for how we should tax that revenue?

Photo of Philip Hammond Philip Hammond The Chancellor of the Exchequer

I would not call it a French model; it is a Franco-German initiative. We have been working closely with the French and the Germans on this issue. We discussed it at the G20 in Buenos Aires a couple of weeks ago and we will discuss it again at the informal ECOFIN meeting in Sofia at the end of next week. The Government’s position is that we are supportive of the EU proposals, but we want to be clear that any such measure can only be a temporary solution. The long-term solution has to be an agreed multilateral approach to the taxation of the digital economy. That requires us to get the United States on side, because most of these global digital companies are domiciled there. Without the United States’ co-operation and support, it will be difficult to make any tax system sustainable.

Photo of Neil Gray Neil Gray Shadow SNP Spokesperson (Social Justice)

It is critical that HMRC collects tax correctly. To that end, will Ministers tell me when I am likely to receive a reply to my letter of 6 February regarding the Roadchef case? HMRC is still to settle with the Roadchef employees benefit trust in respect of money paid to HMRC as tax in error.

Photo of Philip Hammond Philip Hammond The Chancellor of the Exchequer

My right hon. Friend the Financial Secretary to the Treasury tells me that he agreed to meet the hon. Gentleman but has not heard from him to arrange a meeting. Let me reiterate on my right hon. Friend’s behalf that he would be happy to meet the hon. Gentleman to discuss this case.

Photo of Chris Philp Chris Philp Conservative, Croydon South

Thank you, Mr Speaker; I could hardly resist such encouragement.

I wished only to say how much I welcomed the Government’s recent paper, published by the Financial Secretary—[Interruption.] There is a serious point. The paper on corporate tax and the digital economy demonstrated again that this country is showing leadership. I encourage the Treasury to look into working with the European Union on a sales tax, and even to consider a user tax, if we can do that more quickly.

Photo of Philip Hammond Philip Hammond The Chancellor of the Exchequer

Thank you for your very carefully tailored piece of demand stimulation, Mr Speaker. It was much appreciated for the economy of the Chamber.

My hon. Friend is right. As I have already said, working with the EU on this interim proposal for a turnover-based tax is, we believe, the right thing to do. We have, of course, also introduced an interim measure of our own, seeking to tax licence fees that are paid to low-tax jurisdictions where we judge that the underlying basis of the licence fee is economic activity taking place in the UK. We have that measure already in place, and we will continue to work with the EU on its proposed measure.

Photo of Anneliese Dodds Anneliese Dodds Shadow Minister (Treasury)

Despite promising to tighten up on Scottish Limited Partnerships, not a single non-compliant SLP appears to have been fined, which could have raised up to £2.2 billion. When will SLPs be banned, and what action are the Government taking on other shell companies to stop tax fiddling and money laundering?

Photo of Philip Hammond Philip Hammond The Chancellor of the Exchequer

The hon. Lady asks a specific and detailed question about Scottish Limited Partnerships. The legislation is designed to deter the kind of activity to which she refers. The absence of fines should not be taken as an indication of an absence of activity. As she will know, Her Majesty’s Revenue and Customs always seeks, first of all, to deter non-compliant behaviour before it moves into hard compliance. If I may, I will write to her with a more detailed answer on the very specific point about Scottish Limited Partnerships.

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (Economy), SNP Deputy Leader, Shadow SNP Spokesperson (Economy)

To follow up on that question about Scottish Limited Partnerships, I am concerned that the Chancellor is not able to stand up and talk about tangible action that he is taking on this matter. This has been a live issue for a very long period of time. Will he commit to taking action on Scottish Limited Partnerships?

Photo of Philip Hammond Philip Hammond The Chancellor of the Exchequer

What I can commit to the House is this: wherever HMRC detects non-compliant behaviour, it will act, but it is for HMRC to determine how best to act in individual cases, and it is right that Ministers do not have direct involvement in HMRC pursuing individual cases. I will write to the Opposition spokesman, Anneliese Dodds, and I am sure that Kirsty Blackman will be interested in that reply.

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (Economy), SNP Deputy Leader, Shadow SNP Spokesperson (Economy)

There were 2,800 Scottish Limited Partnerships registered last year, only 1,100 of which have registered persons of significant control That is a very low percentage. Of that 1,100, 172 are registered as belonging to Russian individuals. Given all that is happening just now, it is vital that the Chancellor takes urgent action on this—not just a letter at some point in the future. This needs to happen as soon as possible.

Photo of Philip Hammond Philip Hammond The Chancellor of the Exchequer

I will ensure that the hon. Lady gets the letter as soon as possible. It is right to focus on groups that are using structures for non-compliance or purposes that we would wish to deter, and HMRC will always do so. I will update her by letter, hopefully later today.