My right honourable friend the Financial Secretary to the Treasury (Stephen Timms) has made the following Written Ministerial Statement.
Her Majesty’s Revenue and Customs (HMRC) has today published a consultation document on the implementation of a code of practice on taxation for banks.
The Government are committed to developing and safeguarding a UK tax system whereby everyone pays their fair share. Tax avoidance compromises the effectiveness of the tax system and unfairly results in a greater tax burden being borne by compliant taxpayers. This undermines public confidence and imposes significant costs on society.
The Government have consistently tackled avoidance since 1997—making reforms to the tax system, introducing the disclosure regime and closing legislative loopholes. We vigorously challenge tax avoidance, through the courts if necessary. The UK also plays a leading role in international efforts to counter avoidance through sharing of information and intelligence.
Tax avoidance schemes continue to be developed and marketed and it is right that the Government act to close them. No country has found an agreed or enforceable definition of avoidance—much avoidance reduces tax in ways that go beyond the spirit, but not the letter, of the law.
We seek to ensure that anti-avoidance rules are properly targeted so that they only affect those aiming to avoid tax and where appropriate, to consult with businesses on the detail of the legislation. Business has welcomed this approach and it has led to better legislation. We continue to develop our strategy and practice for tackling tax avoidance and we are today publishing a code of practice for banks which builds on the key themes of good governance and transparency with HMRC that have been key components of the Government’s approach to the administration of company tax.
Banks play a vital role in the UK. They are important contributors of tax, and banks, alongside firms in other sectors, will want to arrange their tax affairs efficiently. But it is clear that some banks have been involved in tax avoidance that goes well beyond reasonable tax planning. Given their access to capital and financial markets as well as their range of contacts, banks are uniquely placed to enter into transactions designed to avoid tax, offer transactions of this sort to their customers, or simply to provide the very large amounts of funding and other financial instruments these transactions can require. The code seeks to change behaviours and attitudes towards tax avoidance in the banking sector.
We, and the public, rightly expect banks, and financial services firms more generally, to show a high degree of responsibility, the highest standards of corporate governance and to have an open, transparent and professional relationship with HMRC. When the Government have provided significant support to strengthen the financial system, it is right that measures are taken to introduce a higher level of public transparency. This will not happen overnight and we need to work with the banks and other stakeholders to achieve it.
This consultation is a starting point in changing the behaviour of banks in relation to tax avoidance. Over the coming months we will be speaking to banks to develop a shared understanding of where banks should draw the line, where we want them to raise and resolve issues with HMRC and to ascertain the appropriate level of accountability for behaviours at a senior level that they can achieve; and what they can expect from HMRC in return.
The consultation document can be found on HMRC’s website at www.hmrc.gov.uk. A copy has also been deposited in the Libraries of both Houses.