In response to an urgent question from the opposition, Financial Secretary to the Treasury Mel Stride made a statement and took questions from MPs on the revelations contained in the first extracts of the so-called ‘Paradise Papers’.
For the Government Mel Stride defended the Government’s record on tax avoidance and evasion, saying in 2015, HMRC received £800 million in additional funding to go on tackling tax avoidance and evasion. He said HMRC already hold vast data due to the initiatives the Government has undertaken, such as automatic exchange of financial account information through the common reporting standard. “The Government have implemented international agreements that have changed the game for those seeking to avoid and evade their taxes”. He pointed to progress on the common reporting standard across 100 different countries. The use of offshore accounts or trusts does not automatically mean dishonesty, he said. The new criminal offence for firms that do not stop staff facilitating tax evasion is an example of the 35 additional measures the Government is taking between now and the end of this Parliament to ensure it clamps down on tax avoidance, evasion and non-compliance, MPs were told.
For Labour Shadow Chancellor John McDonnell told Stride that the figure for additional tax revenues he gave (£160 billion) could not be verified from any publically available data. He said the Tories’ reference to a closing tax gap does not include the ‘likes of Apple, Facebook, Google and others’. He asked what information the minister has had about the domicile status of Lord Ashcroft between 2010 and 2015, and whether Lord Ashcroft was paying taxes on his overseas wealth. He also raised Labour’s proposals to establish an independent public inquiry into tax avoidance. In response Stride said the £160 billion is in the Treasury’s annual report and accounts. He would not be drawn on the tax affairs of Ashcroft or any other ‘individual taxpayer’. People are concerned about ‘morally wrong avoidance’ the minister said.
From the Conservative backbenches Nigel Mills wants the latest leak to be a spur for the Government to publish its anti-corruption strategy and to lead to a public register of the ownership of properties here by overseas companies. Peter Bone said people who put their money into an ISA are avoiding tax but that is ‘completely legal’. Anna Soubry said the UK is leading the world on tackling tax avoidance. Helen Whately was told by Stride that the Government is looking at various recommendations coming out of the BEPS regime, some of which were covered in the Finance Bill, to stop ‘flagrant’ tax avoidance. States in the US that have low standards and the Paradise Papers show the need for standards to be raised globally, not just in some of these ‘island paradise states’, said James Duddridge. Andrew Selous was told by Stride that if someone receives a fee, then sends it to a trust fund in Mauritius only to receive the money back as a loan, it would ‘fall foul of our very rigorous disguised remuneration arrangements’. Robert Jenrick said the profits of the Duchy of Lancaster are used exclusively for official purposes and that its investment board is at arm’s length from the Government.
Backbench Labour speakers included Dame Margaret Hodge who said action so far has not got to the heart of the issue, which is that ‘we need to have openness and transparency about who owns what company and where, and who owns what trust’, in other words public registers of beneficial ownership. Angela Eagle is worried about the tangled web of Russian money that appears to be involved at ‘very high levels’. Luciana Berger said the Government should reinstate the thousands of tax officer posts they have cut in Liverpool and right across the country. Liam Byrne pointed out that tax transparency was ‘certainly not’ included in the text of the Transatlantic Trade and Investment Partnership. The idea that every time the word ‘trust’ is mentioned it suggests something grubby or illegal is plain wrong, Stride told David Lammy. Some 130,000 UK companies have not completed their ‘persons with significant control’ registers, and not one of them has been fined, said Justin Madders. Paul Sweeney said over 100,000 properties in the UK, worth over £122 billion, are owned by overseas-registered UK companies in the British Virgin Islands and the Channel Islands, and that represents a ‘conservatively estimated £2 billion in tax avoidance a year’. This is a moment to ‘grip’ the Land Registry and ensure it has compulsory registration of land and property in the UK, with the full structure of ownership and their value. Stella Creasy would like to see a moratorium while the Panama Papers are being investigated on any public contracts going to companies that have offshore trusts was given short thrift by Stride.
From the SNP benches Stewart Hosie asked the Government to throw its weight behind not just local but global transparency on the beneficial ownership of businesses through offshore trusts, funds, and other opaque devices. Chris Stephens pointed out that there are 420 employees in HMRC’s high net worth unit compared to 3,765 employees in the Department for Work and Pensions chasing social security fraud.
Lib Dem Leader Sir Vince Cable asked what sanctions the Government have taken, and what sanctions they proposed to take, in respect of British overseas territories that pursue tax policies that are damaging to Britain. Stride replied that the Government is working with the EU on a ‘so-called blacklist’. Stride told Green co-leader Caroline Lucas that discussions on the blacklist at the EU are ongoing, will conclude at the end of 2017 and the UK has done ‘nothing to block them’.
The full debate can be read here.