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Banking: Offshore Accounts

Volume 740: debated on Tuesday 20 November 2012


Asked by

To ask Her Majesty’s Government what estimate HM Revenue and Customs has made of the value of offshore accounts held by British citizens in the Channel Islands; and what steps are being taken to investigate them.

My Lords, HMRC estimates that UK citizens hold approximately £19 billion in bank deposits situated in Jersey, Guernsey and the Isle of Man together. The UK has double-taxation agreements with Jersey and Guernsey, and uses these in support of its work in investigating tax evasion. HMRC will also be using the more recent tax information exchange agreements in a similar way. Through the establishment of a specialist offshore co-ordination unit, HMRC continues to enhance its capacity in combating all offshore tax evasion.

My Lords, my noble friend will know that Jersey is one of the most secretive tax havens in the world. In a tax haven, neither corporate profits nor other profits of a corporate nature are taxed, nor are capital gains. Will he say whether there is any way in which those large, wealthy corporations which make their profits out of the UK consumer in this country can be persuaded or cajoled by HMRC into paying the taxes that they should? Secondly, can any steps be taken to prevent illegal profits—I am referring to those from, for example, fraud and theft, including Mr Paulo Maluf of Brazil—from being placed in secret accounts in a way that enables such people to escape international justice altogether?

My Lords, I do not think that I will be able to help the noble Baroness in the case of Mr Maluf, who is a Brazilian citizen. We are not in a position to comment on his case. In respect of international corporations, the key thing is the extent to which we can extend international co-operation in that respect, which is why the recent announcement of the UK Chancellor and the German Finance Minister, following a G20 Finance Ministers’ meeting in Mexico, was very important. We are now looking at concerted international co-operation to strengthen international tax standards. However, at the moment, it may mean that international companies can pay less tax than they would otherwise owe. We are trying to catch up with new forms of commerce and to make sure that tax is paid in proportion to where people are undertaking their business.

My Lords, I declare a past interest as a senior partner in an accountancy practice. Does the Minister recall that the advice best given is the thickness of a prison wall between tax avoidance and tax evasion? We all welcome everything that the Government are doing to try to deal with the evasion side. However, does the Minister accept that there is a serious problem on the avoidance side in that there is a danger that an accountant could be held in abuse of his work and could be sued for negligence if he does not give advice on the best form of tax avoidance?

My Lords, when it comes to tax avoidance, it is important that we begin to tilt the balance towards what is considered acceptable behaviour. That is one of the reasons why we will be introducing in next year’s Budget, or Finance Bill, a general anti-abuse rule. Those, including accountants, who undertake tax schemes, the principle purpose of which is to avoid tax, will find themselves subject to the rigour of that rule.

The noble Lord mentioned talks with Germany. Is he able to tell us how many companies of European origin, or individuals of European origin, are also involved in the Channel Islands as, if you like, tax exiles? Bearing in mind the disgraceful evidence we saw in the House of Commons the other week from Google, Amazon and Starbucks, should this be addressed at a European level? If that is happening—one of the countries involved was Holland and I would guess that the Channel Islands are probably involved as well—we really should address this issue at a European level because what has been happening is absolutely unacceptable.

I obviously agree with the noble Lord’s latter statement. Many recent examples clearly are unacceptable, which is why we have taken a great interest in, and are looking forward to hearing more about, the initiative that the EU Commission has taken this week in terms of reformulating what constitutes a tax haven. He is right that we can do a certain amount ourselves but we are going to deal with this international issue only through international co-operation.

My Lords, will my noble friend clarify the position, as I genuinely do not know the answer to the question? Are we able to deal with companies such as Google and Starbucks and others which are not paying the tax that they should pay in this country or are we constrained by European law from being prevented from doing so?

I can reassure the noble Lord that we are being constrained not by European Law but by international accounting standards. There is no suggestion that Starbucks and the other companies are breaking the law but the accounting standards allow them to manipulate the point at which they take a tax charge on revenues that they raise.

My Lords, would it be possible to stop Google paying the minimal amount of tax as it is an international global company in whatever part of the world where the tax is the lowest?

This is why we need increased international co-operation and why the G20 initiative is so important. Obviously if people can just shift off all their revenues to a low tax jurisdiction, some companies are going to do so. We are working very hard with our international partners on this because we have a common interest in making sure that these companies pay a fair share of tax.

My Lords, the Minister mentioned £19 billion that is tied up in Jersey related to UK citizens—a very precise figure. Does this mean that there is sufficient transparency, and that we have a sufficient viewing, of what is happening in Jersey? Do we have sufficient HMRC resources addressing that? And if the answer to both of those is yes, does he have a feel for the amount of money that the UK Exchequer could expect out of these people if we were better able to get hold of that money through agreement?

My Lords, in terms of resources, the Government have committed an extra £917 million over the current period to combat tax avoidance and evasion. That money is now being redirected with HMRC. It has led already to several convictions involving overseas tax evasion. The fact that £19 billion of funds is held by UK citizens in Jersey does not mean that £19 billion is improperly held in Jersey. A very large proportion of that money is there perfectly properly. We have to understand that simply because you have a bank account in Jersey does not of itself mean that you are a crook.