The Government are leading the world in the fight against tax evasion and it was Britain that first demanded that multinationals publish, country by country, where they pay tax. Thanks to our leadership, that is now being taken up at a European level. Multinationals selling into Europe will be required to report the tax they pay, including in ultra-low tax locations. Britain has also got its leading allies to agree to share information on the beneficial ownership of companies. We are now seeking international leadership on a blacklist of tax havens, with punitive action against the jurisdictions on that blacklist. We want the rest of the world to follow our example; where we lead, others should follow.
I thank the Chancellor for that answer, but Conservative MEPs have voted six times on instruction from the Treasury to block EU-wide measures against tax avoidance. What action will the Chancellor take to get all Crown dependencies to establish a public register of beneficial ownership?
At a European level, we are now getting agreement to ensure that multinationals should disclose where they pay tax around the world, including in ultra-low tax jurisdictions. We have just agreed with our leading European allies, France, Germany, Italy and Spain, that we will exchange information on beneficial ownership. In terms of public registries, we are literally one of the very few countries in the world—one of only two or three countries in the entire world—to have committed to a public register, but we want all jurisdictions, not just our overseas territories but all the other advanced economies of the world, to follow our lead.
Last month, I tabled a series of written questions about the tax gap resulting from individuals and businesses using overseas territories and Crown dependencies. All seven questions were grouped into one answer from the Financial Secretary, which basically said, “We have no idea.” Now that the Government have been shamed by the Panama papers into hasty action, will they finally rectify the extraordinary situation whereby the Government have no idea how much is lost to the Treasury in this way each year? Would a public register of beneficial ownership not help in this regard?
We have published more detail on the tax gap than the previous Government and we have shown that it is at one of its lowest levels in our history. This Government have collected £26 billion more than was being collected by a Labour Government in extra compliance.
Tax havens are merely a symptom of a much wider problem, which is that too often the wrong values are at the heart of our financial system. There is too much greed. There is insufficient reciprocity. There is still too great a disconnection between the real economy and the needs of our society. Eight years on from the financial crisis, what is the Chancellor’s genuine assessment of how much has changed for the better?
That is a perfectly reasonable question, and it was well put. A huge amount has changed. There is much tougher regulation of the financial system, and we have better regulators. Banks are more on the case of bad action in their areas, but it is true that more needs to be done to create a proper culture in the banking system in which they treat customers fairly and seek to do the right thing. That is happening, and the banks that do it will get rewards from customers in the marketplace. Like other professions, the industry is seeking to improve its standards of conduct.
The Chancellor will be aware that the reporting requirements for private companies are a lot less stringent than those for publicly listed companies. Although the register of beneficial ownership is an improvement, we need to know not just who owns a particular company but how much tax they are avoiding. If a company gets away with not publishing income, turnover or profit, that will not do. May I ask him what steps he will take with our overseas territories to ensure that this is rectified?
The recent information-sharing agreement that the Chancellor has just referred to could turn out to be a very significant step in the fight against tax evasion, and I support it. The public are right to be upset when businesses or individuals do not pay their fair share of tax. Evasion needs to be rigorously pursued, but does the Chancellor agree that when that is caused by tax avoidance, it is the job of Government to simplify the tax code and close the loopholes exploited by the avoiders?
I broadly agree with my right hon. Friend. I welcome the welcome that he gives to the agreement that we have with four other European countries on the exchange of information on beneficial ownership. We hope that will set an example that not just the rest of Europe, but the rest of the world will follow.
On tax avoidance, of course it is the responsibility of the House of Commons and the Government to try to make sure that the tax code and tax law are simple and do what is intended, but we are in a constant race, as has always been the case, against highly paid accountancy firms and the like, who design very contrived systems to avoid tax and avoid the intention of Parliament. There has been a significant development in our jurisprudence whereby the Supreme Court now takes into account the intention of Parliament, as well as the letter of the law. I think that is right, because as I say, there is sometimes a bit of an arms race in relation to the tax code, and the wishes of Parliament should be taken into account by our courts.
I congratulate my right hon. Friend on the agreement that he has just reached. Is it not the case that HMRC employs 26,000 investigators who work to stop tax evasion and avoidance, and that they have brought in more than £2 billion over the past six years from offshore tax avoidance? Does he agree that we should congratulate HMRC on doing the good job that its investigators are doing, and thank them for their work, and that anyone who criticises HMRC in that respect is just plain wrong?
My hon. Friend is right to highlight the good work that HMRC does. It has never been popular to be a tax collector in any country at any point in history. HMRC is doing a good job in that respect. We are putting more resources in so that it can target particularly wealthy individuals who are evading tax. We now have 26,000 people employed by the Government to ensure that people comply with our tax laws.
I congratulate the Chancellor on the work that he has done to close loopholes—more than any previous Chancellor—but does he recognise that a low-tax economy will attract wealthy people from all over the world to invest in our economy, create jobs and pay more tax, so the Exchequer draws more tax in the end?
I entirely agree. We as Conservatives believe that there should be low taxes, but taxes that are paid. That is the right approach. That is why we have reduced corporation tax, and why we are reducing income tax by raising the tax-free personal allowance. When we cut the top rate of tax, we collected more income for the Exchequer.
My hon. Friend, who is an excellent Member of Parliament in the west of England, is right. We get lots of suggestions from the Labour party about what we should do about tax. Labour was in office for 13 years and had Treasury Ministers answering questions for 13 years. Not a single one of these things happened when they were in charge, and no one believes that if Labour were ever back in charge, it would be tough and take action.
Shall we bring the discussion back to today? In the Panama revelations about the behaviour of offshore companies, the Chancellor could not fail to notice the key role played in many of those deals by UK-headquartered banks and UK-based intermediaries. For example, HSBC and its affiliates created more offshore companies through Mossack Fonseca than any other bank. In view of the significant role played by UK banks, will the Chancellor support the new clause tabled by Labour to today’s Bank of England and Financial Services Bill, requiring British financial institutions to record the true owners of any companies or trusts that they work for? Will he also, like me, welcome the proposal from my right hon. Friend the Member for Birkenhead (Frank Field) for a register of the beneficial owners of property in the UK to tackle money laundering, often linked to tax evasion?
First, we are introducing a register of the beneficial ownership of companies and trusts that need to pay tax, and of course banks must therefore comply with it. Secondly, we are introducing—this will be in the Queen’s Speech—a new criminal offence of facilitating tax evasion, which will apply to the corporate sector in Britain as well. That is in addition to the criminal offence we have introduced that says ignorance is no defence when someone comes before the courts if it is found that they have been evading taxes.
Tax havens lead to a loss of revenue here as individuals can hide through opaque structures and businesses simply do not pay UK tax in respect of where economic activity takes place. Given the revelations from Mossack Fonseca, has the Treasury carried out a new assessment to calculate the scale and size of the revenue lost to the UK?
There are already a large number of ongoing investigations in respect of Panama, which we hope will lead to prosecutions, and the Government already had data on Mossack Fonseca. If there is additional information available in the Panama papers—despite our requests, the media organisations have not yet handed all that information over to us—we will act on it.
Can I ask the Chancellor to be more assertive and to go much further? Mossack Fonseca is the fourth biggest such firm in Panama, and I presume that there are dozens, scores or hundreds of smaller ones, and there will be many, many more in other countries. The scale and scope of this are likely to be astronomical. He and the Government need to go much further. We need to have a much clearer understanding of the scale of this. I ask him to make all the representations he can to the Panamanian authorities and other jurisdictions where similar activities are taking place.
To be frank, representations are not going to be enough with some of these jurisdictions. That is why we want international agreement to a blacklist that jurisdictions will go on if they do not comply with the norms that we are establishing on transparency, exchange of information and the like. Once they are on the blacklist, they are subject to penalties and punitive action—sanctions, if you like—so that it is clear that they cannot carry on doing business in the way they have been. If the whole world comes around on that—there was welcome support for this British-promoted concept at the G20 last week in Washington—so that we get that blacklist and that punitive action, I think that we will help to solve this problem.