My Lords, the Government recognise that this issue has a significant impact in preventing a level playing field for legitimate UK businesses. That is why the Government took decisive action at Budget 2016 to tackle VAT non-compliance by overseas traders who sell goods to UK customers via online marketplaces.
My Lords, that is a very welcome reply—albeit that it has been a very long time coming. For several years now, the Inland Revenue has known that it is losing £1.5 billion in VAT, and that we are losing £6 billion a year in economic activity, but has done nothing, so I am delighted to hear that things are changing. Will my noble friend please make sure that the Chancellor emphasises to HMRC that fairness is important, and that having teams of heavies go round to UK taxpayers and then do nothing about enormous abuse by Amazon and its serfs really gets people’s goats, does not make people love the taxation system and does not make them like the Government, either?
First, I pay tribute to my noble friend for being a consistent campaigner on this issue, which has brought about significant change. We introduced the change where there is joint and several liability. The problem here is that non-EU importers are bringing in goods to the UK at wholesale prices, storing them here, selling them on at retail prices and not paying the VAT, thereby undercutting small businesses. We responded to that by introducing joint and several liability for online providers. That has meant that the number of non-EU traders registered in the UK has gone up from 700 to 17,500 just over the past two years—so we believe that we are making progress, but there is a lot more to do and we have further ideas in that area.
My Lords, before the revelations of the Paradise papers, was Her Majesty’s Revenue and Customs aware of the device involving the Isle of Man used by a famous racing driver? If so, why was nothing done about it? If HMRC was not aware of it, will it now close that loophole?
VAT is a matter for the Isle of Man to deal with, but we have said that we are aware that there is a potentially significant problem here. Her Majesty’s Treasury has been approached by the Isle of Man Government and asked to provide technical advice on how to assess and close that loophole. We hope that will be a way of moving forward to ensure that everybody pays the taxes that are due.
My Lords, I thank the Minister for pointing out what is in the new Finance Act—namely, the aim to catch non-EU businesses selling goods in the UK and avoiding VAT. However, the application of the scheme is set to widen post Tory Brexit as the EU/non-EU distinction will no longer apply. What additional resources will be allocated to this issue, given that at the same time resources will be needed to implement Making Tax Digital in April 2019, and the new customs declaration service?
The noble Lord is absolutely right to say that there is a big change from traditional sorts of trading to online trading. It is therefore essential that HMRC tracks that in moving towards making tax digital. That is what we are trying to do. We are also saying that fulfilment houses, which are a device used to store goods for onward selling in the UK, will need to register from April next year. Perhaps most relevant to the point that he raises, we are also looking at the idea of having split taxation so that, rather than going through the declaration element, the minute that a transaction is triggered online, the tax immediately goes to the Exchequer. That seems a more sensible way forward. We consulted on that and will come forward with our proposals on it very shortly.
My Lords, as the noble Lord, Lord Lucas, has clearly exposed, the Government have been somewhat tardy in dealing with this issue—as they have been on so many issues which involve the multinationals. Will the Minister recognise that legislative time is no excuse as the Government introduce a Finance Bill every year in which they could, and should, address these significant issues? Does he appreciate that the Government ought to have a comprehensive plan to restore transparency to our tax system—which is what a future Labour Government will deliver?
Before we wait for the future one, we might reflect on what the last one did or did not do in this area. The truth is that these are fast-moving instruments; people are arbitraging the system and looking at how to exploit advantages from a trading point of view. HMRC has been vigilant and has come forward with ideas—and when it does, we implement them. That is why we put them forward in the Finance Bill and are bringing forward the measures we are talking about. That is also why the 75 measures on tax evasion and avoidance that we have introduced since 2010 have raised £160 billion for public services.
I think that the particular case the noble Lord refers to is about how some employees of the BBC are remunerated using taxation. There is a standard briefing in my pack here, which says that I cannot refer to specific individuals and their taxation status. However, suffice it to say that, thanks to the BBC, we are all now aware of them— including HMRC.
My Lords, I declare some of my past life, which is in the register and which should be taken note of. There is no prospect whatever of the Inland Revenue getting on top of the range of activities which you now require without more staff— not just in numbers but in quality, experience and knowledge, and a capacity for doing forensic work. Will the Government undertake a review of what is required?
Since 2010—this is absolutely right—the Government have invested £1.8 billion in trying to tackle avoidance. However, it is clear that, as well as looking at the headcount issue, we should also look at the additional revenues that are generated. In that regard, HMRC has a very positive story to tell. However, we need to be smarter and use more technology to ensure that all people who have a liability to pay UK tax, in whatever form, do so.