Multinational Companies and UK Corporation Tax [Relevant documents: Ninth Report from the Committee of Public Accounts, Tax Avoidance–Google, HC 112; Forty-fourth Report from the Committee of Public Accounts, Session 2012-13, Tax avoidance: the role of large accountancy firms, HC 870; Twenty-ninth Report from the Committee of Public Accounts, Session 2012-13, Tax avoidance: tackling marketed avoidance schemes, HC 788, and the Treasury Minute, Cm 8613; Nineteenth Report from the Committee of Public Accounts, Session 2012-13, HM Revenue & Customs: Annual Report and Accounts 2011-12, HC 716, and the Treasury Minute, Cm 8556.] 16:12:00 Chris White (Warwick and Leamington) (Con) I beg to move, That this House has considered the matter of multinational companies and UK corporation tax. I am grateful to the Backbench Business Committee for giving the House the opportunity to debate the important issue of corporation tax and the avoidance of tax by multinational corporations. I was keen to see this debate take place, not only because of the gravity of the issue but because of the efforts that two local retailers, Frances and Keith Smith of Warwick and Kenilworth Books, have taken to raise the profile of the matter. They have launched a petition, which has gathered 170,000 signatures, calling on Amazon UK to pay UK corporation tax, and I would like to pay tribute to their public spiritedness and determination in pursuit of this cause. Individuals can make a difference in politics, as I am sure hon. Members would agree, and we should encourage more citizens to take similar action. The issue that I would like to put at the heart of the debate is tax avoidance, rather than tax evasion, which is illegal. I think all Members would strongly condemn any kind of tax evasion. However, tax avoidance, sometimes euphemistically called “tax planning”, is also a matter of serious concern. The case that Frances and Keith have raised illustrates the problem. Amazon made £4.3 billion in sales in the UK last year, but its subsidiary Amazon UK paid only £2.4 million in corporate taxes. It does this by classifying itself as a service provider to its Luxembourg business Amazon EU Sarl in order to reduce its tax bill, yet its UK business employs over 4,200 people, compared with the 380 based in Luxembourg. Given the size of the UK market, it is laughable to believe that Amazon UK is somehow serving the Luxembourg portion of the business, but this is perfectly legal and Amazon UK is not an isolated case. However, this avoidance is not without its victims. It is businesses such as Warwick Books in my constituency and ordinary people who pick up the bill. Through this creative tax planning, the burden of taxation is shifted on to individuals and businesses that do not have the resources to spend on reducing their tax bill and on hiring expensive accountants to find loopholes in tax law. I understand that there are some who believe that businesses have a moral duty to pay only the absolute minimum of tax that they are legally obliged to pay, but I cannot believe that that is the case. Businesses, even multinational companies, are still members of society. They benefit from a strong education system, a functioning health care system, decent roads, a transport infrastructure, the police and our armed forces. The reason we raise taxes is in order to produce public goods. We can argue whether the Government spend that money wisely, or whether the Government should provide this or that service, but that is the basic principle behind taxation. Businesses have a moral responsibility to play a full part in our society, and structuring their businesses in order to avoid taxation and to make it harder for tax authorities to monitor their business is not fulfilling that responsibility. Voluntarily paying tax is not a long-term solution to this issue. What is needed is for multinational companies to take responsibility for their actions and respect the fact that they need to structure their businesses to reflect the way they are operated, rather than merely to avoid that taxation. If a company is legitimately servicing another company in another country, or needs to pay royalties as part of a franchise or needs to borrow money from its parent abroad, I believe we can all understand that this should be respected in the tax system. We do not wish to crush enterprise, nor do we wish to penalise international businesses that invest in our country, but multinational companies still need to play their part. The endless game of cat and mouse, with tax authorities having to plug gaps and investigate subsidiaries, and multinational companies developing ever more complicated legal structures to avoid paying tax, is simply unsustainable and destructive. Many of these companies depend on individuals and businesses buying their services, but as they avoid taxation, the Government have to find this revenue from other sources, reducing the profits and incomes of others and leaving them with less to spend on other goods and services. The regulatory arms race between multinational companies and states seeking to raise revenue is also distracting. It is distracting the corporations from focusing on productivity and creativity, and one wonders what marvels or products might have been created if multi- nationals had put the effort they put into avoiding tax into developing new ideas, services and products. Tax avoidance does not benefit our economy in the long term; that can only come through making our economy more productive and more efficient. We need to encourage businesses to focus on the real economy rather than on trying to enhance their profitability by avoiding taxation. The sheer mechanics of the situation make it clear that action purely from the Government is unlikely to be the solution to the problem. There are hundreds of thousands of multinational companies, and only a handful of tax regimes capable of monitoring their information. It is always a game of catch-up, and while reforming tax codes and greater enforcement may help, they will not reach the nub of the problem. That is why I believe that we need to focus on the culture in international business, on the structure of these businesses and the codes of conduct they abide by. Fundamentally, businesses are staffed by people, and if we put in place the right frameworks, I believe that we can appeal to the better angels of their nature. This is the only long-term solution. I am realistic, however, and I appreciate that there will always be corporations that are unwilling to contribute to the public good and wish to shirk their responsibilities. That is why I am pleased that Her Majesty’s Revenue and Customs has been given additional resources in order to clamp down on tax evasion, but HMRC also needs to be more robust in the way it holds these companies to account. Katy Clark (North Ayrshire and Arran) (Lab) Will the hon. Gentleman give way? Chris White I would like to, but if the hon. Lady does not mind, we are very short of time. These companies need to be held to account and we need to feel free to investigate fully the accounts of any company that we suspect might be seeking to avoid paying taxation. This highlights another issue, one that is close to my heart and to that of many colleagues— the future of our independent retailers. Warwick and Leamington is full of many excellent independent businesses, which give our community its distinctive character, and not only provide incomes for the owners, but hire local residents and often give young people the chance to get their first experience of work. Times change, and I do not think any of us would support or even want a situation where multinational companies were prevented from entering the workplace, but I think we all recognise the need for a mixed economy. We need independent, smaller businesses and large multinational companies working together. We need to recognise that in the 21st century, the idea of the capitalist as some profit-making machine, uncaring or unthinking about the effects of its business on wider society is completely outdated. For the most part, I believe that businesses recognise that. International progress is essential, and the Prime Minister should be applauded for his efforts at the G8 last week and the agreement that he secured. Britain cannot take unilateral action without significantly damaging our economic position, and while changes such as the general anti-abuse rule are welcome, real progress will only come from companies themselves. A model that we need to look at more closely is that of social enterprises, but a successful 21st century global economy needs to be one that combines equity with entrepreneurship; principles with profit; responsibility with reward. We are taking the first steps forwards by talking about this issue, but I hope that we can move towards action in the years to come. Several hon. Members rose— Mr Deputy Speaker (Mr Lindsay Hoyle) I remind Members that there is a four-minute limit on speeches. 16:23:00 Margaret Hodge (Barking) (Lab) I congratulate the hon. Member for Warwick and Leamington (Chris White) on securing the debate and on his contribution, with which I totally agree, and I congratulate my hon. Friend the Member for Newcastle-under-Lyme (Paul Farrelly) on supporting him. The vexed question of multinational companies and their failure to pay a fair share of corporation tax on the profits they secure from the activities they undertake in this country has struck an incredibly powerful chord with the British public. If we take the Amazon example, we find that in 2012 it had sales of £4 billion in the UK, yet it paid only £2.4 million in corporation tax, and then took £2.5 million in grants from the UK Government. That is simply unacceptable. In this climate, people are finding it tough to manage their daily income, there are public expenditure cuts and small businesses feel hounded by HMRC, so I can well understand why there is huge anger at the behaviour of multinational companies that seek so aggressively to avoid paying their tax. I am particularly cross about the argument, which so many of them put forward, that because they pay other taxes they can decide voluntarily whether to pay corporation tax. We all pay our council tax, VAT and income tax; they pay business rates and employer contributions, and should also pay their corporation tax. I know the Minister is concerned that if we tread too heavily on companies they may seek to relocate elsewhere, but I draw to his attention the remarks of Eric Schmidt, the chief executive of Google, who said that whatever we decide to do, his company would remain here, because this is too important a market for it not to do so. I also draw the Minister’s attention to the fact that feelings are so strong on this issue that we should not, in an attempt to keep multinational corporations here, allow them to blackmail us. Such corporations will stay because of the market: they come here because we are outside the euro and have a strong financial services sector, not because our corporation tax regime treats them gently. We must toughen up HMRC. It is unacceptable that there has not been one case challenging an internet company on whether it pays a fair share of corporation tax here. I am not convinced that such companies are acting within the law, and until we challenge them we will not know whether I and the members of my Committee, who I think feel the same as I do on the evidence we have received, are right or wrong. Greater transparency is needed. Gone is the age when one could hide behind taxpayer confidentiality; proper information should be given to the public, whether it is a matter of opening up the books of the FTSE top 100 companies, or more naming and shaming of people for tax avoidance. We should be tougher on public procurement. I welcomed the initiative, but its practical effect is much weaker than the original intent. We must simplify our tax code—six people working on that is not enough. In a climate in which multinationals value their reputation, they see themselves in our market over the longer term, and they, too— Mr Deputy Speaker (Mr Lindsay Hoyle) Order. 16:27:00 Charlie Elphicke (Dover) (Con) It is a pleasure to speak in the debate, and I congratulate my hon. Friend the Member for Warwick and Leamington (Chris White) on securing it. Hard-working families want a better life for themselves and their children. They go out each day, work hard, strive, and pay their taxes. They face increasing costs in some areas of their lives, particularly in rising household bills for gas, electricity and water. The average family have seen their annual household bills rise by £384 since 2010. I am concerned about whether utility companies are paying the appropriate amount of tax. I have done a study of nine water companies, which, collectively, have a turnover of £28 billion and operating profits of £10 billion a year, yet they paid just £541 million in tax, an effective tax rate of 5%, which goes down to about 3% if we take into account those who have been declaring tax losses. I have looked at two electricity companies, EDF and RWE npower, which have a collective total turnover of £25.6 billion and operating profits of £1.7 billion, yet they paid no tax whatever. It cannot all be explained by capital allowances. Foreign-owned utilities, particularly in the water industry, have been engaging in schemes using debt interest to avoid tax, which, on my calculations, have resulted in a loss to the Exchequer of about £1 billion over the last three years. Let us take the example of Southern Water, which covers the area I represent. Over the three most recent years for which figures are available, it generated more than £2 billion in turnover, operating profits of £767 million and paid a net tax charge of £45.9 million. That is an effective tax rate of 6%. Yorkshire Water, over the last three years, generated £2.6 billion in turnover, operating profits of £990 million, and yet received a net tax credit of £46.2 million. Anglian Water, over the last three available years, generated £3.3 billion in turnover, operating profits of £1.4 billion and paid a net tax charge of just £124.7 million. That is an effective tax rate of 8.9%. What concerns me particularly is that those companies have been abusing the interest deduction system. Over the last three years, Southern Water made some £481.6 million of net interest and interest-related payments to the multinational owners of group companies overseas. According to my calculations, the tax forgone is a potential £125 million for the Exchequer. Yorkshire Water, which is especially egregious in this respect, made £548.5 of net interest and interest-related payments to group companies. According to my calculations, the tax forgone is £142 million. Anglian Water made £365 million of net interest and interest-related payments to group companies over the three most recent years for which figures are available. According to my calculations, the tax forgone is some £95 million. Over the three most recent years for which figures are available, EDF, which is owned by the French Government, made £268.4 million of interest payments to group companies. According to my calculations, the tax forgone is potentially £70 million, if we assume a corporation tax rate of about the average, 26%. Npower made £58 million of interest payments to group companies. According to my calculations, the tax forgone is £93 million. I am calling on the regulators to examine the position and to say that if the water companies, in particular, are receiving too high a return in total, they should either be subject to a windfall tax or reduce customers’ bills. Tax-avoiding water companies, and other utility companies, should be made to give a rebate to hard-pressed customers who have faced increased bills in recent years. I hope that Ministers will consider the options available to them. In any event, tax law should be changed so that interest is no longer favoured over equity. Specifically, interest payments from one group company to another should not be tax-deductible. 16:31:00 Paul Farrelly (Newcastle-under-Lyme) (Lab) I saw this somewhat curtailed debate as an important opportunity for other Back Benchers to add more power to the elbow of the Public Accounts Committee, chaired so forcefully by my right hon. Friend the Member for Barking (Margaret Hodge). The Committee has shone a powerful spotlight not only on multinational tax dodgers but, importantly, on the timidity of HMRC. I shall return to the subject of HMRC’s mindset a little later. Controversy over profit-shifting is hardly new—it has rumbled on for years—but, with the G8 only just over, it is easy to forget that it is only a little over 12 months since the issue finally gained enough traction to be given a place on the national agenda. I think that the reasons for that are clear: it has happened because since the banking crash and the recession Treasury coffers are bare, because of the sheer cumulative scale of the avoidance, because of the sheer size of the deposits held by United States multinationals offshore—at the last count, $83 billion was held offshore by Apple, the biggest of them all—and because the companies themselves are so brazen. Eric Schmidt of Google said that he was proud of what the company had done. He said: “It’s called capitalism. We are proudly capitalistic.” This year, Apple put its money where its mouth was silent. In May, in the world’s biggest corporate bond issue, it raised $17 billion in the United States. Given the comfort of its offshore cash pile, it will pay even less tax, because the interest is tax-deductible. It is cheaper to borrow than to pay tax in those companies’ universe. They are perhaps not so much “immoral”, as they were memorably described by my right hon. Friend the Member for Barking (Margaret Hodge), as entirely amoral. However, HMRC is so meek that legislators would not have the necessary ammunition without investigative journalists and campaigners prying into the shadows. It was a close friend and former colleague of mine, Ian Griffiths, who combed Amazon’s accounts in Luxembourg and the United States last year. “A great deal for Amazon: £7 billion sales, no UK corporation tax” was the headline on the front page of The Guardian. In February last year, Simon Duke wrote an in-depth piece in The Sunday Times about Facebook entitled “The Anti-Social Network”. He tracked the way in which the social website had deliberately organised the avoidance of millions in tax, routeing revenues through Dublin à la Google. A series of exposés followed on different companies—“the untaxables”, as the newspaper called them—and kept up the pressure. The third journalistic push came from Reuters, an organisation for which I once worked as a journalist. Following his investigation of Starbucks, Tom Bergin revealed that rather than reducing sales booked in the United Kingdom, like Google and Amazon, it loaded its United Kingdom operation with so many costs that little or no UK profit was apparently made. Two campaigners have also been at the forefront of these investigations: Richard Brooks, a former tax inspector, and Richard Murphy, an accountant and founder of the Tax Justice Network. I urge the people at HMRC to read their recent books closely, as I entirely agree with the PAC report of last year that criticised the mindset of HMRC in not being more assertive in pursuing multinational tax avoidance. We have heard about how absurd it is for HMRC to accept the way that Amazon does business; that flies in the face of common sense. Despite the scale of its operations here, its overseas Luxembourg subsidiary is not classed as having a permanent establishment. It is important that the OECD changes the rules as they are outdated, but we should not let our attention simply be deflected internationally as there are plenty of things we can do here. There is plenty that HMRC can do. To see that only takes an examination of its rule book, and the double tax treaty with Luxembourg, and the test it applies. With the tools at its disposal, it can push harder here and now, to pursue this issue and raise billions of pounds for the hard-pressed coffers of the Treasury. 16:35:00 Ian Swales (Redcar) (LD) I welcome the moves the Government have been making, but there is still a lot more to do. For example, Vodafone declares a profit of £2.5 billion in Luxembourg, where it has no business. It is incredibly easy for companies to export UK profits to their country of choice. Luxembourg is often the country of choice. It is used by Vodafone, Tesco, Pearson, the Daily Express group and many others. In fact, it is becoming almost compulsory to do this. Low-risk, profitable businesses, such as utilities, have to do it, otherwise they will be taken over, as most of them have been. That applies to trade takeovers too, such as those involving Boots and Cadbury. Under the system here in the UK, it is almost impossible to be a long-term profitable company without doing this kind of activity. UK profits are exported. That is a key item in the business case for takeovers, and now we have also got the internet making all this even simpler. As many companies have shown, companies can build up a huge business in a country, apparently without being there. A little quoted part of HMRC’s own rules—I have not got time to read it out now—says it should be going after these companies. It does not apply its own rules, so I urge it to start getting tough and the OECD to start driving home the simple principle that if a company sells in a country, it must account for that there and owe taxes there. Until then everyone will be climbing on the bandwagon—or should I say the Trainline, which now apparently routes its ticket sales through Luxembourg? I firmly believe the key reason for flat UK growth is that so much of our UK economic activity is no longer counted here. Has productivity really fallen so much that 1 million extra people are producing no extra output, or is that because, for example, Amazon, one of our fastest-growing businesses, is not actually here, and is therefore saving vast amounts of tax? It is time for Brussels to deal with the cuckoos in the EU nest. Ireland, Luxembourg and the Netherlands have arrangements that routinely enable tax avoidance. I am sure the free movement of capital was never meant to mean the free removal of taxes. International work is vital. For example, are the Government dealing with scams used by banks? They can create instruments that are traded between countries with different tax regimes, and with a bit of fancy footwork create a net tax reduction manufactured out of thin air. I welcome the moves to greater transparency, but there is a long way to go. I recommend the recent Private Eye article, “Where there’s muck, there’s brass plates”, which has highlighted that over 11,000 UK limited liability partnerships have been set up since that was enabled by the last Government and they are now one of the corporate vehicles of choice for the world’s money launderers and tax avoiders. They provide a magic mix of UK respectability and absolutely no transparency or scrutiny. Action is needed. The Government obviously work regularly with advisers on tax matters, but who are they? They are top finance directors, who will almost certainly be engaged in tax avoidance, and big four tax partners who make a very juicy living from advising on how to avoid tax. I recommend that the Government add people who are involved in tax campaigning, as well as campaigning journalists, global poverty campaigners and other experts who do not have a vested interest in tax avoidance and who can see how toxic the current system is. In a speech in January I went into more detail about the solutions. Today, I will just make one recommendation. It is time to cap the allowable offshore royalty and interest payments, possibly by only allowing a double taxation relief—in other words people only get tax relief on interest if they have paid tax on it somewhere else. Secondly, we should set up new systems to police our national borders— Mr Deputy Speaker (Mr Lindsay Hoyle) Order. Time is up. I call Nick Smith. 16:39:00 Nick Smith (Blaenau Gwent) (Lab) In the past 15 years, the world of e-commerce has become a fundamental part of our lives. It has shaped the way companies do business, how money is handled and many of our shopping habits, but it has also changed the nature of business on a global scale and therefore our ability to levy a fair level of taxation has fallen behind. In my work with the Public Accounts Committee, I have seen the massive rewards for e-commerce leaders. As has been pointed out, Amazon alone made £4.3 billion of sales last year in the UK, yet by running its sales through Luxembourg it paid a meagre £2.4 million tax bill in 2012. That is less than one tenth of 1% of sales and that is just not good enough. It would be remiss to ignore the thousands of jobs that such companies have created, but when our grants to those companies outpace the returns in tax, questions must be asked. In Wales alone, the Welsh Government have thrown millions at Amazon to bring it to Swansea. An £8.8 million regional selective assistance grant was given to bring the company into the city, while a £3 million link road entitled “Amazon way” finished construction late last year. So, we have a regional Government supporting regeneration and jobs, but the money from the Treasury used to fund that growth is not being recovered. The Public Accounts Committee, of which I am a member, concluded that Her Majesty’s Revenue and Customs needs real teeth to be able to challenge the artificial nature of how businesses set up to avoid tax, as well as to be able to push against antiquated international tax laws. It is time for the Government to get a grip on tax avoidance. E-commerce will increase as our appetite for doing our business online grows exponentially. Perhaps when he sums up, the Minister will reflect on examples such as the double benefit gained by Amazon thanks to the incentives it has received to set up in Wales and other places while we still suffer the loss of corporation tax revenue. I know the companies pay local rates and national insurance and have employees who pay tax too, but that does not excuse the times when they trouser our support and avoid corporation tax. Will the Government review the company support criteria in such cases? If companies like Amazon are not going to deliver, perhaps it is time that we all had a refund. 16:42:00 Katy Clark (North Ayrshire and Arran) (Lab) I strongly welcome the cross-party will among Back Benchers to bring this incredibly important issue to the House. The estimates of how much is lost to the British economy through tax avoidance in its many forms go up to in the region of £120 billion. Lots of people have different figures, but there is no doubt that if we could get on top of the issue—not of tax evasion, when people illegally do not pay their taxes, but of tax avoidance—many of our other debates in this House about the deficit and so on would be skewered. We face a major challenge, as over decades we have reached a situation in which we do not collect the taxes we need to pay for the services we want to provide in the communities we represent. We need to reach some sort of solution so that we can collect those taxes. It is interesting that in this Back-Bench debate we have heard people from different political parties speaking with one voice. One of the problems in the debate is that for a long time the leaderships of the parties have not had the political courage to take on the multinationals. If we reflect on the speeches we have heard today and read Hansard tomorrow, we will see that it is notable that these companies are household names. They are not the kinds of companies that would move out of Britain. To suggest that Starbucks, Amazon, Vodafone, npower, Google or HSBC will pack up their bags, move away and stop making profits out of our constituents is ludicrous. The reality is not that progress will be made only by the companies themselves. Yes, we need to change the culture in companies. Yes, we need to name and shame. But as politicians we have to change the rules of the debate. That means changes in law so that we are far tougher on those who avoid taxes but also tackle those who evade taxes. Paul Farrelly Does my hon. Friend agree that we should use our influence within the European Union to, as the hon. Member for Redcar (Ian Swales) said, sort out the cuckoos in the nest who provide effective tax havens? Will she join me in congratulating Senator Philippe Marini, president of the French Senate finance committee, who has been in the vanguard in Europe of pressing for concerted European action? Katy Clark I congratulate all those who are working to get international agreements to tackle this problem, including the British Government. The reality is that we also have to look at what we are doing here and now. Since 2005, we have lost 37,000 jobs in HMRC. We expect to lose another 10,000 tax inspectors by 2015. No doubt the Government will come back and say that there are slight increases in the numbers of staff in specialist and criminal investigations, but they are only one part of the team that looks at all these issues. We have to highlight clearly the use of tax havens by FTSE companies—98 out of the top 100 use them. We have to say that roughly one in five of the world’s tax havens are the responsibility of the UK and that the use of those tax havens is estimated to cost the UK £18.5 billion a year. These issues need to be tackled internationally, but we have a lot to do at home. We need to build a consensus in all political parties that we need tax laws which ensure that multinationals pay their due in this country. Unless we do that, a lot of the other debates in this place, whether on legal aid or how we fund hospitals or education, are nonsense. We need the money to go forward. Perhaps one of the things that comes out of this financial crisis will be a recognition that all parts of society must make their contribution. Some of the companies that we have been talking about today should be at the top of the list for ensuring that we all pay our way. 16:47:00 Catherine McKinnell (Newcastle upon Tyne North) (Lab) Let me begin by commending the hon. Member for Warwick and Leamington (Chris White) for securing this Backbench Business Committee debate, ably supported by my hon. Friends the Members for Newcastle-under-Lyme (Paul Farrelly) and for Paisley and Renfrewshire North (Jim Sheridan). Once again, we find ourselves discussing the challenge of corporate taxation—an issue which increasingly agitates not just businesses up and down the country but members of the public. The mood could not really be better exemplified than by the constituents of the hon. Member for Warwick and Leamington, who run the independent bookshop Warwick Books. As the hon. Gentleman outlined, Francis and Keith Smith achieved quite a remarkable feat by gathering 170,000 signatures for their petition calling on a certain online bookseller to pay its fair share of corporate tax. They highlighted the fact that last year the company made £3.3 billion of sales in the UK, yet it is not registered to pay corporation tax here. The hon. Gentleman’s constituents and I have something in common in that we both studied at Northumbria university. I also understand that one of them once worked at Fenwick’s, which is a great Newcastle department store. So it is enough to convince me of their pedigree. We have had a thoughtful and productive debate, with excellent contributions from both sides of the Chamber. All hon. Members have noted the cross-party agreement, certainly on the problem and the diagnosis, if not necessarily on the cure. I commend my right hon. Friend the Member for Barking (Margaret Hodge) for her contribution, for her powerful chairing of the Public Accounts Committee, and for the work it has done, and I commend all the members of the Committee who have raised this issue in the eyes of the public. At the beginning of this year, my right hon. Friends the Leader of the Opposition and the shadow Chancellor laid down a challenge to the Government to end the era of tax secrecy and to use the G8 presidency to do that, both by showing international leadership and by taking action here at home. I think we all agree that sometimes there are good reasons why companies pay little, reduced or even no tax: some firms are investing large sums in research and development, assets and infrastructure, and where that is done for genuine commercial reasons and not simply to minimise their tax liability, it is to be welcomed and has to be acknowledged in the tax system. However, as I have said previously in this Chamber, something has gone very wrong in the system when a large multinational company can make £1.2 billion-worth of sales in this country and describe itself to investors as profitable, yet report no UK tax liability. It is not only UK taxpayers who pay the price of such profits shifting, although the loss to the Exchequer is significant, and my hon. Friend the Member for North Ayrshire and Arran (Katy Clark) powerfully argued the case for why this is so important to the UK Exchequer. Such behaviour totally undermines the notion of a level commercial playing field by putting at a serious disadvantage responsible firms that pay their fair share of tax on profits generated in this country, as well as employ thousands of people here and pay all the associated taxes. There are those who believe that the problem is just too difficult, too complicated, too entrenched to tackle, and I suspect that that is what some people—especially those who are involved in that sort of activity—would like us to think, but we believe that there are measures that the Government could and should be instigating right now to end the era of tax secrecy and move us toward the greater transparency that is so desperately required if we are to rebuild confidence in our tax system. To give him his due, the Prime Minister committed to putting tax avoidance at the top of the G8 agenda when world leaders met in Northern Ireland last week, and many people—including several million campaigners for tax transparency—had high hopes for what could be achieved through the UK presidency of the G8. Ahead of the summit, we called on the UK to push for an internationally agreed system of country-by-country reporting in which multinational corporations, regardless of sector, would be required to publish a simple statement of the amount of tax they pay. We believe that that information should incorporate multinational revenues, profits and taxes paid in every country in which they operate, and include the key pieces of information that enable people, whether they are experts or not, properly to assess the amount of tax they pay. That would also benefit British consumers by enabling them to make informed choices about the companies they buy from. The G8 leaders’ communiqué stated: “We call on the OECD to develop a common template for country-by-country reporting to tax authorities by major multinational enterprises, taking account of concerns regarding non-cooperative jurisdictions.” That is a serious step in the right direction, but we need to see far more detail and we need to see it soon. Today, we have heard about various tricks used by multinationals to minimise or avoid their tax liability in this country—for example, shifting profits and using complex corporate tax structures. It is increasingly clear that we have failed to keep pace with the changes, and my hon. Friend the Member for North Ayrshire and Arran talked about the resources HMRC needs to tackle the problem. We need progress on transparency if we are to put a stop to multinational and global companies hiding behind an unacceptable veil of secrecy about their tax. 16:53:00 The Exchequer Secretary to the Treasury (Mr David Gauke) We have had a short but useful debate. I congratulate my hon. Friend the Member for Warwick and Leamington (Chris White) on securing it and thank the Backbench Business Committee for granting it. Rightly, this issue has received much greater scrutiny in recent months. The public anger is understandable and not surprising, given that difficult decisions are being made on the public finances and the vast majority of people pay the taxes they owe, and the perception is that some companies are not contributing their fair share or complying with the law. We should say at the outset, and the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) was right to say, that there can be occasions where it is entirely legitimate for a company not to be paying corporation tax if it is making use of reliefs or capital allowances in the way that Parliament intended. It is also the case—there can be confusion about this—that corporation tax is a tax on profits, not a tax on sales. It is also worth remembering that we do collect significant sums of corporation tax from large businesses. But where the public’s concerns are justified, where there is avoidance, by which I mean contrived and artificial behaviour contrary to Parliament’s intention, that is a very serious matter and it is right that we take action. There is an issue of administration. The point has been raised about HMRC’s effectiveness in dealing with tax avoidance by large businesses. I should explain that HMRC works, with regard to large businesses, by putting in place CRMs—customer relationship managers. Their role is essentially to man-mark the most complex and high-risk taxpayers. In recent years that approach has proved to be effective in getting money in. HMRC secured £8 billion of additional compliance yield from large businesses in 2012-13, and more than £23 billion in the past three years. It is an approach that has been endorsed by the OECD. One of the difficulties that HMRC has is that it is bound by taxpayer confidentiality. It cannot give a running commentary to this House on the action that it takes, but the numbers demonstrate that HMRC is effective in getting money in. Margaret Hodge Will the Minister give way? Mr Gauke I will, but I have about two minutes left to cover a lot of ground. Margaret Hodge Why has HMRC not taken one case against any internet company? Mr Gauke Neither the right hon. Lady nor I know what action HMRC has taken with regard to individual companies. What we do know is that it has got billions of pounds in additional yield as a consequence of the action that it takes with large businesses as a whole. With reference to HMRC’s performance across the board, additional yield is being achieved year after year, and this Government have provided resources to increase the yield on evasion and avoidance. One other constraint on HMRC is that it can collect only the tax that is due under the law, and there is an issue here because very often the law that applies to large businesses encompasses international law, OECD arrangements and what is set out in double taxation agreements. The point was raised about the definition of “permanent establishment”. That is set out not just in domestic legislation, but in international law. We have led the way in encouraging the OECD to look at what needs to be done to improve the international situation, to make sure that the base erosion and profit-shifting work can ensure that the tax rules are all up to date for the internet world. We have had a very short debate, and in this very short speech and the time available to me I cannot do justice to all the points that were raised. Let me say in conclusion that HMRC has robust methods in place to ensure that tax compliance by the biggest businesses occurs, and the numbers support that. We have used our international position to make sure that there is progress in bringing international tax law up to date to reflect the current position. We have a Government who are committed to ensuring that large corporates pay the tax that is due. 16:59:00 Chris White This has been a brief debate, but it was still an important one. I thank all Members who have taken part for the crucial points they made. More importantly, I hope that the debate was watched outside the Chamber by the companies that have been referred to and that they take the necessary responsibility to ensure that some of these things are put right. I applaud the Minister’s comments. The Government are moving in the right direction, but I think that this is still a work in progress. Question put and agreed to. Resolved, That this House has considered the matter of multinational companies and UK corporation tax.