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The general principles of tax evasion and avoidance are simple, and I think from listening to the debate that they are agreed across the House: everyone should pay their fair share of taxes. It is an offence to our sense of natural justice if someone manifestly does not pay the tax that most would judge as fair. The fact they are not paying means others have to pay more; otherwise, we do not have money for public services.
But, even more than in most policy areas, the devil is in the detail. I have been reporting on and tackling tax avoidance and evasion for 25 years or so. As a business and economics journalist, I often covered it. As chief executive of the British Bankers Association, I led the banking industry in efforts to tackle tax evasion both here and internationally.
In my five years in the role of chief secretary to the BBA, the banking industry was accused of many different things but very rarely accused itself of tax avoidance and evasion. I think that was largely because we paid over £70 billion in tax, more than any other industry. The general attitude of the industry was, “Well, if we are paying so much tax, we have to got to do our part to make sure everyone else is paying their tax as well”, so banks play a very active role in tackling tax evasion. For example, I led the industry push for a common reporting standard, adopted by the OECD as a global practice, which enabled Governments around the world to more easily find out what money their citizens have in foreign bank accounts, in order to work out how much tax they owe. We worked closely with the Conservative and coalition Governments on a whole range of reforms to tackle tax evasion, both in the UK and internationally. There were countless measures in every Finance Bill to clamp down on tax evasion, and my team worked hard to deliver many of those reforms.
That is why I find it quite frustrating when Opposition spokespeople keep saying that the Government are not doing anything to tackle tax evasion. That is an easy political hit, but it just is not true. We have heard throughout the debate about the many measures that have been put in place. As with so many things, more can always be done, but it is frankly dishonest to say that nothing is being done. I know from my role in international negotiations that the UK is leading the world on tackling tax evasion in so many ways. In the 2018 Budget alone, there were 21 measures to tackle evasion. As anyone with any experience of dealing with these issues in many other countries knows—even some EU countries—there are many places where paying tax is seen as a voluntary activity and avoiding it as a national sport. Bing involved with that makes one realise how much more seriously the UK takes it than almost anywhere else. As we have heard in the debate, the tax gap has been falling over the past 10 years as a result of the measures put in place by the Conservative and coalition Governments and it is now down to 5.6%, one of the lowest in the world. It is a track record we can truly be proud of.
Members may have noticed that I have been talking about tax evasion rather than tax avoidance, and there is a good reason for this, which was reflected on earlier by a couple of my hon. Friends. Our national debate seems to have lost track of the distinction between tax evasion and tax avoidance, but the distinction is critical. Without understanding the difference, we will never develop policies that ensure that everyone pays their fair share of tax. When I was a young BBC business journalist reporting on tax issues, the differences between evasion and avoidance were always rigorously drummed into me by BBC management. There was a very good reason for that: failing to make the distinction could have landed the BBC with a big libel bill.
Evasion is not paying tax that you are legally required to pay. It is a crime and you can end up in jail. Avoidance is changing your affairs so that you pay less tax. It covers a wide range of activities, from the everyday to the egregious. It is playing within existing rules and it is legal. Just as it is important for journalists to know the difference between avoidance and evasion, so it is for policy makers. If tax evasion is causing problems, the solution is stronger enforcement of existing rules. However, if it is tax avoidance that is causing concern, it is not enforcement that is the problem, as no one is actually breaking any rules. It is the rules that are the problem and the solution is to change the rules.
From a policy point of view, evasion is relatively black and white: you clamp down on it. Avoidance is far more complex, however, because it covers such a wide range of activities. An everyday example—some were mentioned earlier—is buying duty free alcohol at the airport. If you take out an ISA, a pension or gift aid, you are avoiding tax. If you buy a low-sugar drink because you do not want to pay the sugar tax on higher sugar drinks, you are avoiding tax. The fact that people change behaviour to reduce the tax they pay has always been at the heart of tax policy. That is why economists always recommend, and Governments try to promote, taxing bads rather than goods—sin taxes and environment taxes.
What any fair-minded person objects to is aggressive tax avoidance which results in companies or people paying less tax than is clearly their fair share, avoids any other public good and deprives the public purse of money. The biggest examples are multinational corporations, who frequently arrange their internal transfer pricing, often of intellectual property, to ensure that most of their profits are booked in low-tax regimes. The Government have introduced many measures, such as the diverted profits tax that we heard about earlier, to tackle that, but the rise of the weightless digital economy, of global technology firms with minimal geographic presence but huge economic clout, has made it a far bigger issue. It is an offence against any sense of fairness, and certainly against the public purse, that incredibly profitable global companies, such as Amazon, Facebook and Google, pay minimal tax in the UK because of the way they arrange their internal finances. It is unfair on their rivals whom they compete with, and it is unfair on taxpayers and those who use public services. That has to change and I am glad the Government are bringing in a digital services tax. We have a track record to be proud of and I will be voting against the motion.