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Tax Avoidance and Evasion
25 February 2020
Lead MP
John Martin McDonnell
Debate Type
General Debate
Tags
TaxationStandards & Ethics
Other Contributors: 50
At a Glance
John Martin McDonnell raised concerns about tax avoidance and evasion in the House of Commons. A government minister responded. Other MPs also contributed.
How the Debate Unfolded
MPs spoke in turn to share their views and ask questions. Here's what each person said:
Lead Contributor
Opened the debate
Notes the significant tax gap between what should be paid and what is actually paid, ranging from £35 billion to £90 billion. Criticises Conservative governments for failing to address tax avoidance while implementing public service cuts. Emphasises the need for proper funding of services after a decade of austerity and calls for robust action against tax avoidance.
Kevin Hollinrake
Con
Thirsk and Malton
Points out that the top 1% of earners contribute about 29.6% of all taxation, up from 25% in 2009-10, questioning Labour's claim of failure.
Hayes and Harlington
Responds by highlighting that the poorest are paying around 40% of their income while the richest pay approximately 34%. Criticises austerity for reducing life expectancy among the poor.
Angela Eagle
Lab
Wallasey
Agrees with McDonnell and emphasises the need for those who can afford to pay their fair share, criticising the proliferation of tax evasion schemes and calling on the Treasury to take action.
Hayes and Harlington
Tributes colleagues raising awareness about industrial-scale tax avoidance. Mentions HMRC's estimate of a £35 billion tax gap, which other experts suggest could be as high as £90 billion due to uncertainties in calculations.
Describes growing public anger towards corporate tax avoidance and the loss of over £1 billion from five major US tech firms. Suggests this money could fund care home rooms, questioning why action is not taken against such practices.
Hayes and Harlington
The speaker emphasised the urgent need to address tax evasion and avoidance, particularly by wealthy corporations and multinationals. He cited a potential £90 billion tax gap and highlighted that large tech companies avoided approximately £5 billion in UK taxes over five years according to Tax Watch UK. McDonnell argued for closing loopholes exploited by non-domiciled individuals (non-dom status) and criticised the Government’s digital services tax as ineffective. He also pointed out that London should not be used as a laundromat for dirty money from tax havens, which undermines international stability and affects developing countries like Mozambique. The speaker urged the Government to increase HMRC staff numbers, establish public registers of trusts and beneficial ownership, and introduce harsher penalties for enablers of tax evasion. He questioned the Chancellor's past associations with tax avoiders and tax havens, suggesting potential conflicts of interest.
Kevan Jones
unknown constituency
Questioned whether HMRC has an ethos of enforcement, especially regarding landfill tax fraud, suggesting that some evasion cases are not investigated due to low value thresholds.
Peter Grant
unknown constituency
Asked about the amount raised from penalties under the diverted profits tax and inquired if anyone had been penalised as a result of failing to comply with this new incentive.
Kevin Hollinrake
Con
Thirsk and Malton
Proposed expanding the corporate offence of failing to prevent tax evasion to include economic crime and money laundering, which would further narrow the tax gap.
Desmond Swayne
Con
New Forest West
Highlighted that the UK has led globally in driving forward an agenda against tax evasion, particularly through automatic exchange of information under the common reporting standard involving over 100 jurisdictions including Switzerland and Crown dependencies.
Margaret Hodge
unknown constituency
Suggested enacting country-by-country reporting to enable better oversight of corporate activities within the UK jurisdiction. Emphasised that transparency is key to addressing tax avoidance issues.
Chris Stephens
unknown constituency
Asked about resources allocated to HMRC's wealthy unit, noting a reduction in staff numbers since 2018 and suggesting more could be invested in tackling this issue.
Kevan Jones
Lab
unknown constituency
Asked about HMRC's approach to tracking individuals who set up companies, fold them after a few years, and then open new ones. He cited an example in the cosmetic surgery industry where individuals moved between companies while owing large amounts of tax.
Hannah Bardell
SNP
unknown constituency
Expressed concern about HMRC offices being relocated from her constituency to Edinburgh, arguing that it will lead to a loss of expertise and additional costs for taxpayers. She urged the Government to rethink its decision or create a hub in West Lothian.
Nigel Mills
Con
unknown constituency
Suggested setting a target to be met by the end of the current Parliament, such as reducing the tax gap by 5%, to encourage HMRC to introduce further measures and actions.
Kevin Hollinrake
Con
Thirsk and Malton
Emphasised that narrowing the tax gap is about fairness for everyone. He questioned whether additional measures would make companies like Google pay a fair amount of tax in the UK.
Alison Thewliss
SNP
Glasgow Central
The tax system in the UK is hugely complex and unwieldy, leading to loopholes that incentivise avoidance and evasion. The SNP calls for a root-and-branch review of the entire system, including measures against tax avoidance, such as reforming Companies House and uncovering beneficial ownership of SLPs, improving transparency of international company taxes, addressing digitisation challenges, implementing Magnitsky powers, and enforcing money laundering directives. The SNP also criticises Labour's IR35 rules for complicating staffing in the NHS. There are ample places within the system where those who do not want to contribute can hide. Tax Justice UK reports highlight significant tax giveaways to the wealthy through loopholes like inheritance tax breaks.
Hannah Bardell
SNP
Livingston
Scottish limited partnerships (SLPs) have a real human impact, such as money laundering from Moldova which drives out human rights defenders. Money can be laundered through SLPs without enforcement or consequences for non-compliance. There is no comeback for firms protecting those who do not register a person of significant control and no repercussions for perpetrators.
Alison Thewliss
SNP
Glasgow Central
SLPs have their own legal personality, allowing assets to be owned without revealing true ownership. Companies House needs urgent reform as it only registers companies without verification or due diligence, undermining the UK's credibility. The Association of Accounting Technicians calls for online platforms to be made liable for VAT collection and remittance. Property registration through overseas entities Bill is crucial to clamp down on dirty money flow, alongside addressing trust abuse.
Hannah Bardell
SNP
Livingston
It should not take an attack on UK soil for the Government to act on issues like those raised in the Sanctions and Anti-Money Laundering Bill. There is a need for urgent action to address tax avoidance and evasion.
Alison Thewliss
SNP
Glasgow Central
The change of tone during the passage of the Sanctions and Anti-Money Laundering Bill was palpable, indicating that the Government only took dirty money seriously when it arrived on their doorstep. The UK Government is taking counterintuitive action by closing local HMRC offices in Aberdeen, Bathgate, Livingston, etc., which undermines local knowledge and accessibility. A Public Accounts Committee report criticised the Government's lack of robust business planning before deciding to base local HMRC offices in expensive city centre locations, wasting public money.
Hannah Bardell
SNP
Livingston
The new office in Edinburgh has poor accessibility for people with disabilities. The move is a waste of resources and should not have been made without considering accessibility issues. This highlights the need to invest properly in HMRC staff and expertise.
Alison Thewliss
SNP
Glasgow Central
HMRC’s botched implementation of the loan charge has left many facing bankruptcy, highlighting the importance of a responsible and reasonable repayment plan. The UK Government must pursue those who facilitate tax avoidance and evasion while ensuring that people pay their taxes as it funds public services and supports social equity.
Damian Hinds
Con
East Hampshire
The UK needs tax receipts to fund public services and ensure fairness in the system. The gap between those who pay their fair share and those who seek to avoid taxes is significant, but the Government has been reducing this gap over the past decade. Since 2010, more than 100 measures have been taken on evasion, avoidance, and non-compliance, including a single beefed-up unit in HMRC and new anti-evasion measures.
Margaret Hodge
Lab
Barking
Welcomed the debate on tackling tax avoidance, evasion, and economic crime. Stressed the importance of fairness in taxation, urging everyone to pay their fair share for public services. Emphasised the need for transparency and public registers of beneficial ownership in overseas territories and Crown dependencies, highlighting examples of illicit activities facilitated by secrecy. Cited figures such as £100 billion in annual illicit money flows through Britain and Tax Watch research indicating that global digital companies should have paid significantly more corporation tax than they actually did.
Peter Grant
SNP
Glenrothes
Interrupted Margaret Hodge to question the inconsistency of MPs receiving advice on how to legally avoid taxes while benefiting from public funding, highlighting potential hypocrisy in those who advise on tax avoidance also being paid handsomely from taxpayers' money.
Margaret Hodge
Lab
Barking
Ms Hodge emphasised the need for digital companies to pay fair taxes and called for country-by-country reporting to ensure transparency. She highlighted Netflix's tax avoidance practices, noting that the company earned about £1 billion in the UK but paid no corporation tax while benefiting from high-end television tax relief worth £1 million over two years. Ms Hodge advocated for legislation linking eligibility for tax reliefs with fair tax behaviour and criticised American extraction of taxes on profits and intellectual property created in the UK. She also called for extending the digital services tax to include streaming services, creating a register of beneficial ownership of property to prevent money laundering, and toughening laws against advisers who create unlawful schemes leading to significant financial hardship.
West Bromwich East
Richards spoke about the rich history of West Bromwich and its industrial heritage. She mentioned her constituency's support for Brexit with a majority of 68% in the European referendum. She also discussed issues such as antisemitism, diversity, local businesses, and transport infrastructure. Richards emphasised the need to develop brownfield land for housing and highlighted the importance of HS2 (High Speed 2) railway project for improving connectivity.
Chris Stephens
SNP
Glasgow South West
The debate is important to show how the country treats its poorest and richest. The speaker criticises HMRC for cutting posts dealing with tax avoidance and evasion, noting a significant reduction in staff numbers over 10 years from 105,000 to 62,000. He points out that HMRC has fewer resources compared to the Department for Work and Pensions despite tackling issues estimated at £112 billion due to tax avoidance and evasion. The speaker raises concerns about HMRC's 'Building our Future' programme which reduces offices from 170 to 13 regional centres, highlighting potential negative impacts on local economies and employees with disabilities.
Suzanne Webb
Con
Stourbridge
Suzanne Webb, the Conservative Member for Stourbridge, emphasised the importance of responsibility and fiscal conservatism. She highlighted her constituency's rich history and praised her predecessor, Margot James, who was a strong advocate for personal responsibility and accountability in tax payment. Webb also discussed the significant political shift towards Conservatism since 1979, acknowledging the influence of Margaret Thatcher on modern Conservative policies. The speech focused on the principles of ownership, individual responsibility, and hard work that have been passed down through generations in her family. She expressed support for HS2 infrastructure development and a commitment to addressing climate change while protecting green spaces. Additionally, she highlighted concerns about knife crime and emphasised her dedication to one nation Conservatism.
Sarah Olney
Lib Dem
Richmond Park
The UK's tax gap is currently around £35 billion, a proportion of overall tax owed. The Liberal Democrats are concerned that enthusiasm for a low-tax economy will result in these new regulations been watered down, to the benefit of those who would prefer less intrusion in their financial affairs. HMRC should be properly resourced so that tax avoidance can be identified and redressed.
Nigel Mills
Con
Westham
We need a whole different approach to tackle the tax gap, with more transparency through various measures on public registers. A target for what we think we can get the tax gap down to could be set, such as getting it down to 5% in the next five years. This would raise about £4 billion a year towards public services.
Kevin Hollinrake
Con
Thirsk and Malton
Hollinrake acknowledged concerns about tax avoidance but argued that raising taxes excessively could lead to negative consequences. He cited statistics showing the UK has some of the highest income tax rates for high earners globally, emphasising the need for a fair playing field for small businesses and tackling tax evasion by large corporations.
Peter Grant
unspecified constituency
Grant questioned Hollinrake on whether his cited statistics related to all taxes or just income tax, challenging the validity of comparing only income tax rates when discussing overall tax contributions from wealthy individuals.
Kevan Jones
Lab
Durham North
Mr. Jones highlighted the issue of landfill tax evasion, which has been a target for fraud by organised crime due to rising tax rates. He cited HMRC's 'Measuring tax gaps' report from 2016 that estimated a £125 million annual gap but argued it could be much higher, potentially reaching up to £1 billion annually. Mr. Jones emphasised the need for action not only because of lost revenue but also due to environmental and public safety concerns linked to waste crime. He supported stricter regulations on waste brokers and tracking systems, suggesting that owners should take responsibility for where large pieces of waste go. He welcomed the new unit for tackling waste crime but called for better enforcement funded adequately.
Rob Roberts
Con
Dulwich and West Norwood
Mr. Roberts discussed taxation from a personal finance perspective, emphasising that paying tax is a privilege in many parts of the world and argued for fairness to individuals who work hard to achieve success but find high levels of taxation punitive. He pointed out legitimate ways to mitigate taxes through allowances like ISAs, pensions, and venture capital trusts, differentiating between avoidance and evasion. Mr. Roberts defended government efforts against tax gaps, noting improvements from a 7.3% gap previously to 5.6%, and criticised Labour for hypocrisy regarding tackling tax issues.
Peter Grant
SNP
Galloway and West Dumfries
The MP criticises the underlying assumption that tax, especially income tax, is bad. He disputes claims about Scotland being the highest taxed part of the UK, suggesting instead that higher taxes for those on his salary are good while lower taxes for those struggling to get by would also be beneficial. He raises concerns over companies transferring profits into offshore accounts and the ease with which legal structures can be set up to avoid taxes. The MP also expresses dissatisfaction with the Scottish limited partnership concept due to its potential misuse in tax avoidance and suggests that the Scottish Parliament should regulate it if needed. Finally, he calls for assurance from the Government regarding HMRC's approach towards companies involved in fraudulent schemes.
Duncan Baker
Con
Orchard Park
The MP acknowledges cross-party support on tax issues and highlights that the UK has one of the best tax collection systems with a falling tax gap. He mentions HMRC's strengthened anti-tax-evasion unit, real-time information, and Making Tax Digital initiatives to reduce fraud. The MP shares an anecdote about his business experience dealing with tax inspections, illustrating how businesses are thoroughly checked for compliance. He argues that tax evasion affects all sizes of entities and cites statistics showing the highest 1% pay a significant portion of income tax. The MP supports measures against global companies avoiding taxes and calls for balance in clamping down on evaders without persecuting wealth generators.
Kevan Jones
Lab
15:20:00
Supports breaking up big accountancy firms due to lack of competition and cartel-like operations. This action is necessary given that these four businesses account for half of all known avoidance schemes according to an HMRC report.
Matt Western
Lab
Warwick and Leamington
The sector should be broken up as it dominates the market, accounting for 50% of known avoidance schemes. The cost of tax avoidance is estimated between £35 billion and £90 billion per year, which could fund significant public investments such as hospitals or school meals.
Matt Rodda
Lab
Reading Central
The lack of leadership from the Government on this issue has exacerbated income inequality. Average incomes only recently caught up with pre-2008 levels, highlighting a failure to address tax avoidance effectively.
Matt Western
Lab
Warwick and Leamington
Former Chancellors have shown poor leadership by promoting tax avoidance. Corporate social responsibility should not replace tax responsibilities; businesses must contribute to society through taxes rather than just charitable donations or volunteer work.
Matt Western
Lab
Warwick and Leamington
Tax is essential for a better society, contributing to infrastructure like roads, education, healthcare, and fire services. The UK needs international intervention to regulate tax avoidance, especially concerning large tech companies that avoid paying taxes.
Nick Smith
Lab
Blaenau Gwent and Rhymney
Estimates suggest five big tech companies paid an effective UK tax rate of just 2.9% in 2018, avoiding £1.3 billion in taxes annually.
Matt Western
Lab
Warwick and Leamington
Tech giants like Amazon should pay their fair share to support fire services and other public utilities that protect their warehouses. Companies such as Facebook must contribute financially for mental health services impacted by their products, while Apple and Google need to be responsible for the waste created through product upgrade cycles.
Gareth Bacon
Con
Orpington
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 this is not supported by facts. The HMRC estimates a tax gap of £35 billion, while £90 billion was cited from Professor Richard Murphy's blog post. However, his judgment has been doubted by several organisations including the Institute for Fiscal Studies. Tax avoidance and evasion have dropped over time with the country’s current tax gap being below 6%, one of the lowest in the world. Labour voted against measures that would raise £7 billion by 2023-24. The Government should be commended on their efforts but need to address off-payroll working issues.
Anthony Browne
Con
not constituency given
The debate's general principles of tax evasion and avoidance are agreed across the House: everyone should pay their fair share. The UK takes tax evasion seriously, with a low tax gap at 5.6%, one of the lowest in the world. More can always be done but it is dishonest to say nothing is being done. Evasion is illegal while avoidance is legal and includes everyday activities like taking out ISAs or paying less sugar tax. The key issue is aggressive tax avoidance by multinational corporations, which needs policy changes rather than enforcement.
Anneliese Dodds
Lab Co-op
Oxford East
Welcomed new MPs, discussed the UK's rise in financial secrecy rankings, highlighted the loss of £25 billion annually due to profit shifting by multinational companies, and called for action on tax avoidance and evasion. Emphasised the need for public registers, trust transparency, corporate criminal liability, and better enforcement measures. Also pointed out deficiencies in HMRC funding and staff morale.
Jesse Norman
Con
Hereford and South Herefordshire
The Minister criticised the Tax Justice Network report, stating that it is based on a flawed methodology and is inaccurate in ranking the UK's tax regime. He acknowledged the Government's efforts to improve tax compliance, highlighting a reduction in the tax gap to 5.6%, down from an average of 6.3% under Labour. The Minister also discussed measures such as the loan charge, diverted profits tax, digital services tax, and IR35, noting that HMRC activities have secured over £200 billion since 2010. He emphasised the importance of data quality in improving compliance and addressed specific issues raised by other MPs including public registers of beneficial ownership, creative sector tax relief, and country-by-country registration.
Requested to give way but was denied due to time constraints.
Government Response
Responded to multiple questions, outlining measures taken by the Government such as the diverted profits tax which has raised £5 billion and improved scrutiny of large businesses. Emphasised HMRC's enforcement role in collecting due taxes, highlighting a reduction in corporate acceptance of tax avoidance from 45% to 21%. Also discussed international efforts through automatic exchange of financial account information and increased penalties for those involved in tax avoidance schemes. The UK tax gap is less than 6%, one of the lowest in the world. Since 2010, the Government has been working to reduce this gap and improve international efforts against tax avoidance, including the introduction of the diverted profits tax and digital services tax. The Minister's speech focused on critiquing the Tax Justice Network report, emphasising the Government's efforts in tax compliance and transparency. He addressed concerns raised by other MPs regarding public registers of beneficial ownership, creative sector tax relief, and country-by-country registration.
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