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Tax Avoidance and Evasion

Part of the debate – in the House of Commons at 3:14 pm on 25th February 2020.

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Photo of Duncan Baker Duncan Baker Conservative, North Norfolk 3:14 pm, 25th February 2020

Clearly, there is a lot of cross-party support on this topic. Benjamin Franklin once said:

“in this world nothing can be said to be certain, except death and taxes.”

In this country, there is no doubt about it; we have one of the best tax collection systems in the world. It has been said a lot already, but the tax gap is now less than 6%. What we have not said enough is that it is falling every time it is measured. Our manifesto promised a strengthened anti-tax-evasion unit in HMRC, and that is welcomed. I guarantee that every time we knock on a constituent’s door and talk to them about paying their fair share of tax, that is what they want to see. We will continue to clamp down on fraud. Through digital measures that have come in over the past few years, we continue to do that. I just wish to mention two schemes that I came across when I was in business. Over the past few years, HMRC has brought in real-time information and Making Tax Digital, both new, electronic ways and means of submitting one’s information to ensure that there is less data manipulation and so the right amount of tax is paid on time by companies and employees. Far from doing nothing about tax avoidance and evasion, this Government are doing quite the opposite.

Before I became an MP, I was in the real world. I was in a business in Norfolk. I recall once opening the post and to my horror seeing that I had a VAT and PAYE inspection all in the space of the same month or so. When my jaw hit the ground, the first thing I thought was, “What have I done wrong to deserve this?” Out came two tax inspectors. They had 50 years of experience in HMRC. They were fantastic people who spent the next week or so giving me a thoroughly good going over; they checked everything from maternity pay calculations to VAT rates on hedgehog food, grass seed and olive trees. I became an expert on zero-rated products—for those who are not aware, I should say that grass seed and hedgehog food are zero-rated. I am still none the wiser about olive trees being standard rated. The real excitement during that process came with the added knowledge that gingerbread men are biscuits and are zero rated. If we dab a bit of chocolate on their eyes, they remain zero-rated, but do not give them any more chocolate buttons, as they then become standard rated. I joke, and people may wonder why I am talking about this, but I do so because it highlights the real facts. This is a real situation going on up and down the country every day, where businesses and individuals are checked to ensure that they are paying their fair rate of tax—and it works. The staff are diligent and hard-working. This was a normal business, with a turnover of roughly £25 million, and over the four years HMRC went back we had to pay around about £800 of additional tax that was required. So if the Chancellor is listening, I can tell him he got his fair share. The point is that people have said today, “Well, it’s only the big businesses. It doesn’t go across the board”, but that is not true. It is black and white: you pay your fair share. The research from the Institute for Fiscal Studies shows that the highest 1% of income tax payers account for 27% of all income tax. We can hardly sit here and say that the wealthiest are not paying their tax, can we? When those in the public eye commit wrongdoing or try to dodge their tax, there can be few news stories that attract more disdain and are more frowned upon. We have massively cracked down on tax avoidance and evasion in the past few years, and the new evasion law will go even further to clamp down on the worst fraud offenders by doubling the maximum prison term to 14 years. We have already secured over £200 billion in additional tax revenues since 2010, and at the 2018 Budget we announced an ambitious package of 21 measures that it is estimated will raise a further £2.1 billion.

I agree with what has been said all around the House about how global companies that do not pay their fair share of tax in this country absolutely should do so. The digital services tax that we will see coming in will start to put some of those things right. As my hon. Friend Rob Roberts said, there are differences between tax evasion and tax avoidance. Companies are not evading tax; they are avoiding it. That is where the legislation needs to be corrected, which is what this Government are doing.

The last point I want to make—I have stressed it before when I have stood up here—is that we have to have a balance: yes, clamp down on tax evaders, but we should not be persecuting the wealth generators in this country, the entrepreneurs and those who create jobs up and down this country.