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Tax Avoidance and Evasion

Part of the debate – in the House of Commons at 3:29 pm on 25th February 2020.

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Photo of Gareth Bacon Gareth Bacon Conservative, Orpington 3:29 pm, 25th February 2020

There have been some very thoughtful speeches on both sides of the House today, but I must open by particularly commending the excellent maiden speeches from my hon. Friends the Members for West Bromwich East (Nicola Richards) and for Stourbridge (Suzanne Webb).

The central contention of the Opposition motion is that the Conservative Government have failed to address tax avoidance and evasion over the last 10 years, but that is simply not borne out by the facts. The range of the tax gap involved that the Opposition have stated is £35 billion to £90 billion. The £35 billion is the HMRC’s estimate, so we will accept that, but the provenance of the £90 billion is rather less certain, and I spent some time searching for it before I came in here. The only reference I can find to it is a blog post by Professor Richard Murphy. Members will remember that Richard Murphy was previously hailed as the founder of Corbynomics and was held up in lights by the Opposition as the answer to the economic problems we have. That was of course before he made the mistake of criticising the Leader of the Opposition, stating that he had

“no policy direction, no messaging, no direction, no co-ordination, no nothing”,

for which of course, in true Corbynista style, he was purged, and the shadow Chancellor later said, “we doubted his judgment.”

The shadow Chancellor is not the only one to doubt Professor Murphy’s judgment, of course. The Oxford University Centre for Business Taxation has done so, as has the Institute for Fiscal Studies, which previously described his estimate of the corporate tax gap as

“likely overstated (possibly by a wide margin).”

Many Members have highlighted the fact that tax avoidance and tax evasion have continued to drop. The country’s tax gap is now below 6% and is one of the lowest in the world, and the trajectory continues to be downwards.

The same Labour party that moved this motion voted against many of the measures that have led to that reduction. By voting against the Second Readings of both the 2018 and 2019 Finance Bills, Labour voted against 39 measures that will raise in excess of £7 billion by 2023-24. So if they have any intellectual honesty, they would be far better off congratulating the Government on closing the tax gap and on having a better record on these issues than they had themselves when they were last in government.

By and large, the evidence shows that the Government are making progress in tackling tax avoidance, and I strongly commend Ministers on their efforts. However, as part of wider efforts to reform the tax system there are individual policies that would benefit from a little more attention. One of them is the issue of off-payroll working, which many of my constituents have written to me about, and I have in turn written to Ministers to outline their concerns to them. Those concerns include reports that clients are already beginning to refuse to engage as a result of the complexity of the rules, and that projected earnings are being drastically reduced without the receipt of equivalent benefits or protections as salaried employees.

It is true that the services economy has changed drastically since off-payroll rules were originally introduced 20 years ago, so I believe that the Government were right to look at reforms. However, it is extremely important that in seeking to close those loopholes the Government avoid unintended consequences that limit our future competitiveness. At a time when maximum labour flexibility is surely a long-term benefit to the UK, I urge Ministers to take that into account.