Second and final day of Finance Bill Committee of Whole House, debating clauses, new clauses and amendments about gaming duty and fixed odds betting terminals, and tax avoidance and evasion. The government accepted opposition proposals and made its own amendments.
The Government accepted four opposition amendments and new clauses during today's Finance Bill debate, as well as moving amendments of their own on the timing of fixed odds betting terminals.
A full set of the clauses and amendments / new clauses tabled in each group is available here. The full text of all amendments / new clauses can be read on the parliamentary web pages in HTML or PDF. (NB Not all amendments / new clauses tabled are accepted for debate.)
Public Bill Committee, at which a small committee of MPs will scrutinise and approve the remaining clauses of the Bill, will begin on Tuesday next week (Nov 27th) and conclude on Tue 11 Dec at the latest. The Bill is generally expected to get Royal Assent w/c Dec 17th.
Liveblog - Finance Bill Committee of Whole House (Day 2) - to begin at 2.45pm.
By Hamant Verma and Chris Young)
Group one : Gaming duty and remote gaming duty
Clause 61: Remote gaming duty (rate)
Clause 62 and schedule 18: Gaming duty
Amendments and new clauses tabled for debate with this group (found here):
• Amendments 16 and 17 (government) - provide for the increase in the rate of remote gaming duty to take effect from 1 April 2019 instead of 1 October 2019 [BOTH PASSED]
• Amendments 11-13 (backbench, cross-party, led by Carolyn Harris (Lab) with many other signatories including Iain Duncan Smith (Con), Kirsty Blackman (SNP) and Nigel Dodds (DUP) - provide for the increase in the rate of remote gaming duty to be set by regulations, but that these cannot be made unless £2 maximum stake for Fixed Odds Betting Terminals (FOBTs) has been given effect from 1 April 2019 (at the latest) (NB. These were tabled before the government announcement that they would introduce the £2 maximum stake for FOBTs from April.) [WITHDRAWN]
• New clause 12 (SNP) - would require a review of the public health effects of gaming provisions [PASSED]
• New clause 13 (SNP) - – would require a report on each of the clauses in this group covering (a) whether a version of the provision was published in draft, (b) if so, whether changes were made as a result of consultation on the draft, and (c) if not, the reasons why the provision was not published in draft and any consultation which took place on the proposed provision in the absence of such a draft [NOT MOVED]
• New clause 16 (backbench, cross-party, led by Carolyn Harris (Lab) – same supporters as amendments 11-13) – requires the Treasury to review the feasibility and impact of bringing forward from October 2019 the implementation of an increase in remote gambling duty, which is linked to the implementation of a £2 maximum stake on FOBTs [WITHDRAWN]
The Chancellor said in the Budget the maximum bet for fixed-odds betting terminals would be reduced from £100 to £2 from October 2019. Sports Minister Tracey Crouch resigned in protest because she said it was too long to wait. However, ahead of this debate it was announced that the cut will actually take place from April after the Government bowed to pressure to perform a U-turn. Ministers had been facing a parliamentary defeat, with several Tory MPs joining opposition politicians to table amendments to this Finance Bill Fixed-odds terminals were introduced in casinos and betting shops in 1999, and offer computerised games at the touch of a button.
Session delayed to allow Lib Dem Leader Sir Vince Cable to ask an urgent question on Interpol presidency election, which is not related to Finance Bill. And delayed owing to a couple of Ministerial Statements (ebola and Data Ethics) and a Ten Minute Rule Motion on Electric Vehicles.
Exchequer Secretary Robert Jenrick moves amendment 16 and 17, also clauses 61 and 62 and schedule 18. These changes will have negligible impact on tax take from casinos and not create much new administrative burdens, he said. On Government amendment 16 and Labour MP Carolyn Harris' amendment 12, this issue is inextricably linked with fixed odds machines. The Govt has recognised the significant harm to society, such as mental distress to the gambler and their family. Having liistented to MPs, the Govt accepts that a cap will limit losses so bringing it forward seems sensible. All the Govt was trying to do originally was to give people and companies time to adapt.
Conservative MP Iain Duncan Smith said there was no reason to wait until the Sports Minister resigned for this change to be nrought forward.
On amendments 17, 13 and 12, Jenrick said the Govt understands the strong will of the House of Commons on this. Govt wants to ensure the Treasury can protect revenues, however. He wants Opposition amendments withdrawn, saying they will lead to too much analysis of gambling. New Clause 12 can only lead to a limited analysis on public health, so this should be rejected. On New Clause 13 he feels likewise. Clause 61 has led to debate but is a simple rate change and not something the Treasury would normally consult on. On section 18, the change made by this clause was consulted on last year and schedule 18 has already been looked at by stakeholders. On NC16, the Govt have covered this matter and should be withdrawn.
The country has campaigned for change and this will be borught in sensibly, added Jenrick.
Labour's Shadow Treasury Minister Clive Lewis said the sector could hardly claim ignorance of MPs' wishes to counter gambling addiction, so did not need time to adapt, as Jenrick said. He said a KPMG report found that the changes would harm corporate profits and not jobs, as the Government claimed. The social cost of addiction is said by CEBR £1.5 billion a year.
Iain Duncan Smith said the success of moving forward the implementation date has been a cross party triumph. He said that casinos should not be viewed as 'regenerating' towns, rather we need to look at the negative consequences. He would of been happy if they made the implementation date this October 2018. He said the Finance Bill amendments have been 'keen drivers' in 'modifying' the Government's approach.
He and Harris made it clear that the amendments will not be pushed to a vote as the Government has already agreed to the thrust of them.
Smith said it is time to look at the advertising of the betting and gambling industry: "This is only the start", he said.
Harris spoke briefly to thank people for 'their downright determination' to sway the Government's opinion. It is regrettable that it took 'strongarm' treatment for the Government to change, rather than see the moral argument.
Conservative Crouch said it was proven that people who use these fixed odds betting terminal are at the highest risk of harm. She said 3,000 people have contacted her to support the stance that led her to resign. As an extra protection, the Minister should support an additional review today. NC12 will help, she suggests.
SNP's Ronnie Cowan spoke to move NC12 and NC13, On NC12, he said there is no cooling off period for gamblers anymore. He said he is not questioning the right to gamble but it is a public health issue. We must look at statutory funding by gambling companies of charities that deal with gambling problems.
Conservative Sir Peter Bottomley is glad the Government rejected the 'wishy washy' suggestion by the gambling companies of £30 as a minimum. The tactics used by the betting companies to avoid change has been 'disgraceful' and counter productive to their shareholders.
SNP's Patricia Gibson spoke in support of NC12. She said many betting shops have been open simply to house these fixed machines. A public health approach must look at the impact on families, she said, and look at marketing. There are 30,000 problem gamblers in Scotland, she said. There is an urgent need to review public health impact of gaming provision, the basis of NC12.
Jenrick replied that Public Health England (PHE) has been asked by Department for Health to inform and support action on gambling and PHE also been commissoned by the Gambling Commission to do an evidence review on problem gambling. The Government would support NC12 but advised it will be a limited review because it is a Finance Bill.
Jim Shannon, Shadow DUP Spokesperson on Health, was shocked that people can lose £100 every few minutes on these fixed machines. He said 'some things' need to be done about scratchcards, too.
Government amendment 16 was passed. Amendment 17 was passed. Clause 61 was passed, as was Clause 62. Schedule 18 was passed. NC12 was passed and will be added to the Bill,
Group Four: Avoidance and Evasion
Clause 15 and schedule 3: Offshore receipts in respect of intangible property - PASSED
Clause 16 and schedule 4: Avoidance involving profit fragmentation arrangements - PASSED
Clause 19: Hybrid and other mismatches: scope of Chapter 8 and “financial instrument” - PASSED
Clause 20: Controlled foreign companies: finance company exemption and control - PASSED
Clause 22 and schedule 7: Payment of CGT exit charges - PASSED
Clause 23 and schedule 8: Corporation tax exit charges - PASSED
Clause 46: Stamp duty: transfers of listed securities and connected persons - PASSED
Clause 47: SDRT: listed securities and connected persons - PASSED
Clause 83: International tax enforcement: disclosable arrangements - AMENDED AND PASSED
Amendments and new clauses tabled for debate with this group:
• Amendment 19 (Lab) – require a review of the effects of the changes to the controlled foreign companies regime made by this section - [WITHDRAWN]
• Amendment 3 (Lab) - require the beneficiary of a trust entering a CGT exit charge payment plan to provide information about the source of its income on a public register - [WITHDRAWN]
• Amendment 4 (Lab) - require the beneficiary of a trust entering a CGT exit charge payment plan to provide information about the source of its income on a public register - [WITHDRAWN]
• Amendment 24 (backbench, cross-party (though no Conservatives), led by Stella Creasy (Lab)) – in relation to clause 83, require a report on the participation of companies that have entered into public private partnership agreements with public sector bodies in arrangements that are required to be disclosed by regulations under this section - [WITHDRAWN]
• Amendment 23 (Lab) – no regulations may be made under clause 83 unless the Chancellor has published a report on how the powers in this section are to be exercised in various Brexit-related scenarios - [ACCEPTED]
• New clause 5 (Lab) - requires the Chancellor to carry out and publish a review of the effects of the tax avoidance provisions of the Bill on households with different levels of income, on child poverty, people with protected characteristics and on a regional basis - [ACCEPTED]
• New clause 6 (Lab) - requires the Chancellor to carry out and publish a review of the effectiveness of the provisions of this Bill in tackling artificial tax avoidance and tax evasion, and in reducing the tax gap - [WITHDRAWN]
• New clause 14 (SNP) - require a review of the effectiveness of the provisions of this Bill on tax avoidance - [ACCEPTED]
• New clause 15 (SNP) – would require a report on each of the clauses in this group covering (a) whether a version of the provision was published in draft, (b) if so, whether changes were made as a result of consultation on the draft, and (c) if not, the reasons why the provision was not published in draft and any consultation which took place on the proposed provision in the absence of such a draft - [WITHDRAWN]
Madam Deputy Speaker tells the House that to be discussed now are clause 15, schedule 1 , clause 16, schedule 4, clause 19 and 20, clause 22, schedule 7, clause 23, schedule 8, clause 46 and 47, clause 83 and NC as set out on selection paper.
Financial Secretary to the Treasury Mel Stride said the Government has ensured that while taxes are low, they are paid. Fairness has to be at the heart of any progressive tax system, he said. On the rise in income tax personal allowance, this has a disproportionate positve impact on the lowest paid. Shadow Treasury Minister Jonathan Reynolds points out that if you pay the top rate of income tax, you gain the most from the personal allowance rise. Stride came back at Reynolds and said those who earn the most are paying most of the tax. Very high tax can be a disincentive to 'go out and produce and create wealth'.
He said the Government has invested £2 billion in HMRC since 2010. Of the largest 200 businesses, around 50 per cent of them are under investigation by HMRC. In 2017/8 alone HMRC secured £30 billion in extra revenue. The UK has taken the lead in the OECD BEPS project and taken the lead in bringing this into domestic legislation. On DST, he said the Government will be addressing not avoidance but bringing the international tax regime into the 21st century. so we can tax profits not just where the bricks and mortar, the staff are, the intellectual property resides or risks or decisons are taken - but where this particular type of value generation is happening. We will try and move forward multilaterally but we will bring this measure in as one of the first movers and we will be advancing in that direction believing it is only right, and the public agree, that these large businsses pay an 'appropriate amount of tax', he said. DST is not just about intangible assets, more about digital platforms and interaction with users, he said. He then gave an example of the type of activity that would be taxes to stop royalties being used as profit shifting.
He outlined Clause 15 and then 16. Clause 46 and 47 addresses contrived advantages used to help people avoid stamp duty on shares. He said.the Government is also taking action on hybrid mismatches. Amendment 19 is a minor change, he said. He then runs through all the clauses in this group.
Amendments 3 and 4 tabled by the Opposition, would require the beneficiary of a trust that pays CGT on an instalment basis to provide information about the source of its income in a public register. He called that 'disproportionate and unnecessary', as law enforcement already have access to much of that information.
Shadow Treasury Minister Anneliese Dodds complained about the Government failing to table an amendment to the law, which lessens the scope of scrutiny from the Opposition. The Government is not doing enough on fake companies which register at Companies House, or on shell companies or use its legal powers to impose fines on partnerships that fail to provide beneficial ownership details. The Government has taken virtually no action on making overseas territories publish public registers of beneficial ownership - one conference call on it, is all that has been done, apparently.
Nothing in the Finance Bill leads us to more transparency on trusts, she complained.
The Government has still not set out how it intends to collaborate with the EU on information sharing for tax purposes, said Dodds.
On NC5, Labour is calling for an equality impact assessment of the Government's tax avoidance measures, as part of a distributional impact review of tax changes, which is necessary because of the amount of tax that is leaking from the system. She suspects tax cuts by the Conservatives have actually benefitted the better off, for example.
On DST, she said there is no tax presented in this Bill, instead a consultation that is less stringent than EU proposals and has 'giant loopholes' in its safe harbour and double threshold elements. Conservative Bim Afolami intervened to say a consultation on DST is essential because 'it is a work in progress'.
She said the Government has taken on Labour's ideas on giving HMRC prefered creditor status, taking some action on umbrella agencies exploiting the working allowance and looking at creating an offshore property levy, although she said the latter lacks precision.
However, she accused the Government of failing to resource HMRC properly to replace the loss of experienced staff because of the restructure. HMRC staff morale very is low, she added.
Conservative Kevin Foster spoke of his concerns that a rushed DST may curb the chance of the next Facebook. He said there needs to a mature debate about the online space. He said the 'Dutch Sandwich' actually started off as a good idea but is now abused. He explained to MPs what intangible property is, saying that there is information about us that we post which is valuable. Intangible property is a key area for the future and how it opens the debate about how we move tax into a digital economy, he said.
Alison Thewliss, SNP, said that her party’s amendments would help strengthen the effectiveness of policy making process to tackle avoidance and evasion and also allow for international comparisons to be made. A greater focus on non-compliance by corporations is to be welcomed, but the increasingly complexity of the tax system was ripe for avoidance.
Thewliss noted that that the Department for Business, Innovation and Skills was yet to formally respond to its consultation on reforms to Scottish Limited Partnerships (SLPs). On an intervention from her colleague Hannah Bardell, SNP, she said she agreed that a lack of action was a threat to Scotland’s reputation. Thewliss then provided an overview of the problems associated with SLPs.
She said that the government had repeatedly rejected “sensible” measures from the SNP benches to crack down on avoidance. There then followed further discussion of the impact of HMRC’s programme of centralising offices, which was resulting in a loss of skills and talent.
On the digital services tax, Thewliss said that the “devil is in the detail” when it comes to the Chancellor’s announcement. The reforms proposed by the government were welcomed, but she said they fell “woefully short” of the “meaningful international action required”.
The Scottish Government, she concluded, had limited powers over evasion and evasion but noted that it had introduced a General Anti-Avoidance Rule that went further than its UK equivalent. She called on the UK Government to devolve powers over tax avoidance and evasion if it was unwilling to take action in its own right, also noting that an independent Scotland would be able to simplify and improve the tax system.
Helen Goodman, Labour, said that she had been given promises by ministers to improve measures against tax avoidance and evasion involving the UK’s crown dependencies earlier this year. She urged the government to accept her party’s proposals for impact assessments, believing that these would allow the government to keep track of its anti-avoidance activity.
Eddie Hughes, Conservative, said his constituents would be amazed to find out that businesses could divert their profits offshore to avoid paying tax. It was a complex system, but he said they would be delighted to note that the government was intent on cracking down on avoidance and evasion. It was yet another example, he claimed, of the Conservative Party taking steps to improve the tax system. The £457 million that could be generated in 2020/21 through these measures would be invested in frontline public services, providing a tangible example of this.
Patricia Gibson, SNP, speaking in favour of the SNP’s new clauses 14 and 15, was critical over the lack of consultation from the government on the measures contained in the Finance Bill. She focused her contributions on a critique of PFI and PPP projects and their financial arrangements, claiming that Scotland had been a “test bed” for private investment in public projects. Greater transparency of the tax affairs of firms involved in such projects would be of benefit to the public finances.
John Lamont, Conservative, spoke in favour of the government’s measures against tax avoidance and evasion. He said that this would generate “much needed” revenue for the public finances. He spoke in support of the digital services tax. He acknowledged that this was not designed to tackle avoidance but that it was a measure that could make the system “more fair and more fit for purpose” in the digital age. He also suggested that the digital services tax would help level the playing field for businesses in his constituency that he claimed were also suffering from the “high tax” policies of the Scottish Government.
He said simplification was a necessary component in the battle against avoidance and that the single fiscal event was a step in this direction. In his remarks on the move back to a single fiscal event, Lamont noted the Chartered Institute of Taxation’s support for the move.
Luke Graham, Conservative, spoke of his “pride” in a “low and fair” tax system that rewarded work and enterprise but was critical of the Scottish Government’s income tax policies that had resulted in people in his Ochil & South Perthshire constituency earning more than £26,000 per year paying more in tax than their English contemporaries do. As a member of the Finance Bill committee last year, Graham voiced his support for efforts to tighten legislation for Scottish Limited Partnerships, and the extra £185 billion in tax revenue that has been generated since his party came to power in 2010. He also said that measures on enforcement and disclosure would help to increase the transparency of the tax system.
Chris Philp, Conservative, said the government's "actions and results speak much louder than reports and words" as he rejected the opposition's new clauses 5 and 6. The "extraordinary low" (by international standards) tax gap was proof of this and "unsurprising". He added that it was disappointing that the opposition had rejected the twenty-one anti-avoidance and anti-evasion measures in the Finance Bill, prompting Anneleise Dodds to point out that the opposition had rejected them due to their weakness. In a later intervention, she suggested to Philp that the government listen to the opposition's proposals to combat avoidance and evasion. Philp rejected this and, pointing towards the concerns of opposition MPs that Brexit may stymie efforts against evasion, said that the UK had shown "genuine global leadership" through the BEPS scheme. Mr Philp also spoke in favour of measures to prevent businesses from using intellectual property charges to split profits between areas of operation.
Paul Masterton, Conservative, said that the government's measures were important in giving the perception of fairness in the tax system. Welcoming these, he said that they would be important to his constituents and addressed the probkem of big businesses "shunting" their profits and failing to reinvest these in the British economy. He expressed support for Alison Thewliss' work on Scottish Limited Partnerships and in particular, her efforts to ensure proper enforcement of the rules governing these. With the debate drawing to a close, James Cartlidge, Conservative, welcomed measures to charge capital gains tax on the sale of commercial properties by non-resident companies.
The Financial Secretary to the Treasury, Mel Stride, in brief closing remarks, said that the government would accept Labour's amendment 23 and new clauses 5 and 14 (from Labour and the SNP respectively) subject to the information being available.
At the conclusion of the debate, clause 15, schedule 3; clause 16, schedule 4; clauses 19-22; clause 23, schedule 7; and clauses 46-47, schedule 8 were passed withouth division. Clause 83 (as amended by amendment 23 (Labour) was passed without division and new clauses 5 (Labour) and 14 (SNP) were added to the bill, again without division.
Proceedings concluded just after 7.00pm.
The full debate can be found here.