Sir Mel Stride
MP for Central Devon · Conservative · United Kingdom
“May I welcome the Chancellor to his position and thank him for his kind remarks earlier? May I also wish him every success, because I am afraid that under this Government we need some? He will know that if we are to fix the economy, we have to fix the welfare bill.”
“Given all that is going on, this could be the last time. The legacy of this Chancellor has been the highest taxes on record, a benefits bill spiralling out of control, and unemployment 300,000 higher than it was at the last general election. The right hon.”
“The right hon. Lady cannot bring herself to answer the simple question I asked. I will tell her: she is borrowing one quarter of a trillion pounds more than the plans that she inherited—that is her legacy. We hear that the right hon. Member for Makerfield (Andy Burnham) is considering borrowing even more.”
“May I begin by agreeing with you, Mr Speaker, and saying how disrespectful it is that this U-turn on fuel duty has already been released to the media earlier this week?”
“Today’s announcements will bring little comfort to the hundreds of thousands of people who have lost their jobs, the countless businesses that have folded and the high streets that are now hollowed out.”
“The Conservative party has been campaigning for a fuel duty freeze for months. The Chancellor repeatedly rejected those calls, creating unnecessary uncertainty for motorists and businesses. Why did it take her so long to realise that putting up fuel duty during an energy crisis is a bad idea?”
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“I would be very happy to do that. The hon. Member for Bootle specifically asked me what meetings I had had about the digital service tax measure. I have had personal interactions with a number of countries. I attended the OECD meeting in Paris some months ago where I furthered and put forward the UK’s position, which is broadly that we should work on a multilateral basis with the OECD and the EU so that we come to a collective agreement. The value of doing that is not limited to the fact that we would iron out any risks of double taxation that would result from going on a unilateral basis. However, we have also made very clear, as the Chancellor announced in the Budget, that we will unilaterally bring in just such a tax by 2020 in the absence of multilateral arrangements. I would be very happy to write to the hon.”
“I do not, for the reasons that I have given. On the matter of how many references there have been, nine in total have supported HMRC’s position. That said, if the hon. Lady has information that suggests there have been 12 referrals, I will look into what might be a further three and what the status of those was.”
“The hon. Lady makes an entirely reasonable request for that information. As I indicated, I am happy to provide it to her. In fact, divine inspiration has just arrived—I have an answer; I knew it was lost somewhere in my mind. There have, in fact, been 12 opinions, all of which have been supportive of HMRC. If she would care for any further information, I am happy to provide it outside the Committee. [Official Report, 3 December 2018, Vol. 650, c. 5MC.] Amendment 11 would make the clause contingent on a review of how the application of globally agreed measures to combat avoidance by multinationals would impact the tax gap. HMRC publishes annual updates on its tax gap analysis. The corporation tax gap is estimated to have declined from 12.4% of total theoretical liabilities in 2005-6, under the previous Government, to 7.4% in 2016-17.”
“I think the hon. Gentleman has described the process beautifully. I would add to his observation that we do have more formal methods of engagement than that which he describes. We publish tax information impact notes for every single tax measure and there is the process that we debated earlier for how taxes and the measures in a Finance Act are scrutinised over time, and so on. To conclude this fairly lengthy debate, I urge the Committee to reject the amendments and I commend the clause to the Committee.”
“If it is in order, Ms Dorries, I will give the hon. Member for Oxford East an additional piece of information on the issue of referrals to the panel. There were nine cases rather than 12; there were 12 opinions on those nine cases, all of which supported HMRC. That might explain how I had a figure of nine while the hon. Lady was focused on 12. [Official Report, 3 December 2018, Vol. 650, c. 5MC.]”
“As the House will know, we have had eight years of economic growth and the Office for Budget Responsibility is now projecting a further five years of growth. We have high levels of employment, low levels of unemployment and we are seeing inflation coming down towards its target as well. That is an important broader macroeconomic context in which we hold this debate and discuss tourism. The second area is business in general. We have reduced tax on companies across the board from 28% in 2010 down to 17% in the coming couple of years.”
“Last year, 2017, was a record year, with 39.2 million visitors to the UK, which was 4.3% up on 2016. Not only are more tourists coming, but they are spending more as well, with an even larger increase in the amount that they are spending. It is important to put on the record the admiration that we as a Government have for the sector and the gratitude that we have for all those who work so hard in what is quite a tough industry—it is one of those sectors that has rather a nice, soft and fun feel to it, but we all appreciate that a lot of hard work goes on behind that. The Government not only recognise the importance of tourism, but are also there to support tourism. I cite three broad areas in which we do that. The first is to get the broader economic factors correct.”
“I congratulate the right hon. Member for Orkney and Shetland (Mr Carmichael) on securing this debate and on his perseverance in ensuring that we have this opportunity to debate these important matters. He quite rightly raised the importance of tourism, of which the Government are extremely aware: 1.6 million people are employed in the sector. He made important points about the sheer reach across the economy of the tourist sector, right down to the very point that he raised in his own constituency of examples of farms where additional income is being raised through participating in tourist-related activity. The sector provides £66 billion to the UK economy and 3.8% of gross value added. He is also right that, at the moment, tourism is booming not just in his constituency, but across the United Kingdom.”
“APD is certainly one of those taxes that we, along with all others, constantly keep under review. My hon. Friend will have noticed the freezing in short-haul APD that occurred at the time of this Budget, but he is right that we seek to keep that and other taxes as low as we can. We supported our high streets in our recent Budget by reducing business rates by some 30% for smaller retailers, which will be of great benefit to some of the coastal towns in particular that the right hon. Gentleman will be thinking of, I know, when he speaks about the importance of tourism to the economy.”
“I thank my hon. Friend for his intervention. I recognise the sterling work that he does in promoting tourism in his own constituency. He is a constituency neighbour of mine and I am well aware of the good work that he does. He is right: we must do a lot of important things in terms of specifically supporting tourism.”
“One of those issues is the fact that, if we are to make a change, under the current arrangements with the European Union that change would have to be UK-wide. It would therefore come with quite a hefty price tag. The Treasury estimates that, in the first year at least—although one recognises there are dynamic effects of reducing taxes, increasing activity and therefore perhaps getting more tax revenue further down the line—we would be looking at a cost of about £10 billion for reducing VAT from 20% down to 5% in the categories that I mentioned. That would be about £7 billion on food and beverages, £2 billion on accommodation and £1 billion on attractions. Some of that loss, or some of the relief that we would be providing, would be dead weight in the sense that it would not necessarily solely apply to supporting tourism.”
“Our tourism action plan looks at regulation, transport, skills and all the other things that underpin tourist activity as well as money and taxation. Some £40 million goes to the Discover England fund for promoting tourism outside London. At the heart of the right hon. Gentleman’s ask is clearly a reduction in VAT, particularly with regard to food and beverages, attractions and accommodation— the areas that he cited when he mentioned the VAT directive and the derogations in items (7), (12) and (12a). The Government recognise the strength of feeling on this matter. We have met campaigners over many years, and I have engaged extensively with Members right across the House. We will keep VAT and VAT on tourism under review, but unfortunately there are some issues from which we cannot hide away.”
“The hon. Gentleman raises the issue of VAT specifically in Northern Ireland. As he will be aware, we undertook a call for evidence, which we announced at the Budget before last. We have now reported on that and will continue to look at the issue of VAT, although we are currently constrained by virtue of our membership of the European Union, as I will argue later. Northern Ireland actually has some advantages over the Republic of Ireland when it comes to VAT. For example, we have the highest VAT threshold for businesses that have to charge VAT in the European Union and the OECD, including the Irish Republic. The right hon. Member for Orkney and Shetland mentioned the specific support we provide for tourism. We provide some £60 million per year for our GREAT Britain campaign, £20 million per year of which goes to VisitBritain.”
“The right hon. Gentleman makes a very important point. As somebody who philosophically believes in lower taxes, I think that is a very strong argument. However, unfortunately there is the cost argument. To use the same kind of principles to the right hon. Gentleman’s argument on recycling, clearly if we were bringing in less by way of taxation as a consequence of the reduction, there would be less to spend on other things that arguably might help tourism, including improved infrastructure and maybe even tax reliefs in other areas, such as the progress that we have made in reducing small retailers’ business rates. We have one of the highest VAT thresholds of any country in both the European Union and the OECD, which is an advantage to us and our tourist sector.”
“However, I absolutely reassure him that everything that he has said on this matter this evening, and indeed has said in the past and will say in future, has been and will be very carefully noted. We will continue to look at all taxes, and certainly VAT. I look forward to further engagement with him in the coming weeks and months, and thank him very much indeed for bringing this important debate to the House. Question put and agreed to.”
“Returning to VAT, we do of course have reduced rates in the United Kingdom in areas like museums and transport such as buses and trains, which is not universally the case across our competitor nations. It is also possible, through the retail export scheme, for certain visitors to the UK to reclaim VAT from certain retailers. That is another important VAT relief. In essence, the right hon. Member for Orkney and Shetland is right that I was not going to spring up to the Dispatch Box and announce a huge tax cut across the tourism sector, much as I would love to have done. Perhaps in this crazy world in which we are living, I should have done, but there we are—I did not. I restrained myself and was responsible, for once.”
“The hon. Gentleman makes a very important point. In fact, I have been to Northern Ireland and met representatives of Belfast airport and others, and I have met them here in the UK—in London—as well. As he will know, we had a call for evidence on APD, which was launched at the Budget before last, and we have reported back on that. We have now set up a technical working group to see what kinds of opportunities there may be to devolve APD to Northern Ireland, although at the moment there is the critical issue of the absence of a Northern Ireland Executive. In the longer term, we would certainly be committed to seeing the issue devolved, and then of course it would be for the Northern Ireland Executive, once reconstituted and up and running, to take the appropriate decisions around that.”
“We have led the way internationally in this respect, playing a leading role in the OECD’s base erosion and profit shifting project, and taking unprecedented action to secure funding for our vital public services and to ensure that everyone pays their fair share. It is worth reflecting on the fact that we do not just collect tax for the sake of collecting tax, because very few people enjoy paying tax. We do it for a purpose, which is to keep our financial affairs in good order and to fund the doctors and nurses in our national health service, and so on.”
“It is a great pleasure, again, to serve under your chairmanship, Dame Eleanor. The Government have always been clear that while taxes should be low, they must be paid, and that is exactly what we have delivered. Since 2010, we have secured and protected over £200 billion by clamping down on tax avoidance, evasion and non-compliance, and we have reduced the UK’s tax gap to less than 6%, which is one of the world’s lowest. In fact, if we were running at the level of the figures achieved under the last Labour Government in 2005-06, we would be deprived of sufficient income to employ every policeman and policewoman in England and Wales, so bringing in tax most certainly does matter.”
“My hon. Friend is entirely right. One thinks, for example, of the sugar levy to improve public health and to make sure that our young people, in particular, move towards a healthier diet. Tax can certainly have an effect in that respect. As my hon. Friend said, there is also the duty on cigarettes, tobacco, hand-rolling tobacco, and alcohol to make sure that as well as just raising revenues, we change behaviour in a way that is conducive to the public good.”
“Since 2010, in fact, we have now removed some 4 million people in total from tax altogether.”
“I thank my hon. Friend for that important intervention. He is absolutely right: fairness has to be the heart and soul of any progressive taxation system, along with competitiveness—we want to keep rates down—and the importance of tax being paid, as I have been elaborating on. On his specific point, we were of course able to announce in the recent Budget—this forms part of the Bill—the increase in the personal allowance, which is now up to £12,500. Bear in mind that in 2010 the personal allowance was about £6,500. The personal allowance is, of course, the amount that an individual can receive by way of earnings without those earnings falling due to income tax. Any increase in the personal allowance does indeed have a disproportionately beneficial impact on the lowest-paid in our country.”
“The hon. Gentleman says he supports our changes to the personal allowance in the Budget, but that was not reflected on Second Reading, when the Labour party voted to reject our tax measures. Indeed, it has been widely critical of our measures to reduce taxation for some 32 million people up and down the country. He will probably be tired of my rehearsing the very important fact that the wealthiest 1% are paying 28% of income tax—a far higher proportion than when Labour was in power, when the figure was 24%.”
“As I have already said, not only do the wealthiest in our society pay a very large proportion of all tax, but under this Government we have seen significant increases in the national living wage. It rose by 4.4% last April, and through the Bill—I am proud to say—we are putting on to the statute book an increase next April of 4.9%. That is well in excess of inflation and will help the very people that both our parties are committed, in our different ways, to assisting—although our measures are more practical than those suggested by the Labour party.”
“That is why we have invested an extra £2 billion since 2010 in HMRC and why we have 24,000 members of HMRC staff dedicated to tackling avoidance, evasion and non-compliance.”
“My hon. Friend makes an important general point about taxation. As we know, very high taxation has a number of undesirable impacts, not just on individuals and businesses, but on the economy and, through that, the general tax take and our ability as a society to fund our public services, and one of those impacts is that which he rightly raises: the disincentive to go out and produce and create the wealth upon which we all depend. It is the duty and mission of this Government, generally across the piece, to keep taxes as low as possible. Since 2010, the Government have introduced more than 100 measures to combat avoidance, evasion and non-compliance, but this alone is not enough. To support these measures, it is vital that HMRC be well funded and well staffed.”
“We know that some large multinationals have been able to avoid tax by exploiting gaps and mismatches in the international tax system. International leadership was required to address the situation, and that is exactly what the Government have provided. We were at the forefront of the OECD’s base erosion and profit shifting project, which agreed major reforms to the international tax system, and we have taken the lead in implementing these recommendations in domestic legislation. We have also been a strong supporter of the EU anti-tax avoidance directive, and we have helped to shape the common approach that it provides for tackling avoidance in the European Union.”
“It is one of the key drivers in tackling tax avoidance and the tax gap—the tax gap occurs not just with individuals but with large corporations and small businesses. I do not have the precise number, but I am happy to write to the hon. Gentleman with that information. What I can tell him is that, at any one time, about 50% of the largest 200 businesses in the country are under investigation, not necessarily because they have done anything wrong but because, logically, HMRC should be looking particularly carefully at the businesses that are making the largest profits and generating the most. This investment is paying off. In 2017-18 alone, HMRC secured and protected more than £30 billion in additional tax revenues which otherwise would have gone unpaid. That was a year-on-year increase of £1.4 billion.”
“While we have said that we will seek to move forward in a multilateral manner, because we recognise the dangers of double taxation in the event that we move unilaterally, we have made it very clear that we will introduce this measure ourselves as a first mover, or one of the first movers, of the leading countries in the world. We think that it is only right, and we believe that the public feel that it is only right, for these very large businesses to pay an appropriate level of tax.”
“That led the Chancellor, in the recent Budget, to announce our move towards a digital services tax, whereby we will not be addressing a question of avoidance—it is important to make that point—but will be bringing the international tax regime into the 21st century, so that we can tax profits not just on the basis of where the bricks and mortar may be, where the staff may be, where the intellectual property may reside or where the commercial risks and decisions are being taken, but on the basis of where this particular type of value generation is occurring.”
“As always, my hon. Friend has made a critical and important point. I took him to be alluding, at least, to the issue of technology businesses—typically, social media businesses, search engines and certain online marketplaces—which, while making substantial profits in our country as a consequence of the interaction of UK users with the digital platforms that they host, are not paying a commensurate level of tax.”
“Any royalties moved from the UK out to that low or no tax jurisdiction will be a form of profit shifting that might be artificial and simply designed to reduce a corporation’s tax bill, which is why we have particular measures in this Bill to address exactly that situation.”
“That is a very good question. In the case of the digital services tax, we are no so much talking about intangible assets, although elements of the Bill—indeed, clauses in this group—relate to ensuring that profits are not artificially shifted as a result of money being moved around in respect of such assets. Here we are talking more about digital platforms, and a particular method of value creation that results from the interaction of UK users with those platforms. However, in terms of intangible assets and intellectual property we might think, for example, of the rights of a particular business based in the UK to carry on business using the branding, know-how and knowledge of a particular piece of intellectual property held in a low or no tax jurisdiction.”
“The clause targets contrived arrangements that, in broad terms, aim to avoid tax by transferring the profits of a UK’s business offshore in a way that would not be agreed between independent parties.”
“Today some large multinationals are able to unfairly reduce their tax bill by arranging to hold their intangible property in offshore entities. That is unacceptable, and we are now going further to level the playing field. Clause 15 requires multinationals that continue to earn intangible property income in low-tax jurisdictions to pay UK income tax on the proportion of that income that relates to UK sales. Tax avoidance is not limited to large multinationals of course; businesses of all shapes and sizes attempt to unfairly shift UK profits to jurisdictions where they expect to pay less tax or perhaps no tax at all, so clause 16 introduces carefully targeted anti-avoidance rules to prevent these UK businesses from avoiding UK tax by shifting their profits to lower-tax jurisdictions.”
“The hon. Gentleman will, of course, be very aware of the devolution of various elements of our tax system to Scotland, and the issue he identifies is fundamentally driven by the different relative rates of taxation in Scotland and in the rest of the United Kingdom. I would argue that it is incumbent upon the Scottish Government to do as the UK Government do where these matters are reserved, which is to keep taxes as low as possible. I know that Conservative Members representing Scottish constituencies are most keen to deliver that for their constituents. As we announced at the autumn Budget in 2017, the Government are legislating in this Bill to tax income from intangible property held in low-tax jurisdictions to the extent that it is income that relates to UK sales.”
“My hon. Friend is absolutely right. The tax avoidance activities that I am describing are way beyond the reach of many businesses of a certain size up and down the country. Thinking particularly of our high street businesses, we have a duty to ensure that fixed costs in the form of taxes represented by business rates are reduced to the extent that they can be, and the Chancellor was able to announce a 30% reduction in business rates for those smaller retailers that typically populate our high streets. That was an extremely important move as we work, through our future high streets fund and other approaches, to enable our high streets to transition and become more vibrant and successful places.”
“The UK is a strong supporter of the objectives of the directive, as it will ensure that member states take a common approach to tackling tax avoidance. The UK’s rules are already comprehensive, and they already meet or exceed most of the requirements set out by the directive, but some limited changes are needed to ensure that we are fully compliant in all areas.”
“The Government are aware that some corporate groups are transferring shares to connected companies for an artificially low consideration. The clauses create a targeted marketed value rule for transfers of listed shares to connected companies. This rule will prevent the use of artificially low consideration by charging stamp taxes on shares on the higher of the market value of, or the sum paid for, the shares transferred. The Bill also re-emphasises our commitment to leading the way in implementing internationally agreed initiatives to combat tax avoidance. Clauses 19, 20 and 23 make changes to the UK’s rules on controlled foreign companies, hybrid mismatches and corporation tax exit charges to ensure that they comply with the EU’s anti-tax avoidance directive.”
“As a UK Government, we are always happy, and indeed keen, to work co-operatively with the devolved Administrations, including the Scottish Government, as my hon. Friend suggests. Ultimately, however, these will be decisions for the Scottish Government to make. It will be for them to decide how to spend the revenues that will come through by way of additional funding via the Barnett formula. I can only suggest once again—I think this echoes my hon. Friend’s thoughts—that the best way forward is to keep taxes down and, in the case of Scotland, to have a country that is known for low taxation, rather than gaining a reputation for higher taxation. Clauses 46 and 47 address the use of contrived arrangements that seek to avoid stamp duty on shares.”
“Although I agree with SNP Members that consulting on tax legislation is important, I do not agree that it is necessary for us to produce a report. Conservative Members will continue to be ever mindful of the simple fact that wealth and money do not belong to the Government. In fact, there is no Government money, only that which is generated by hard-working people right across our country. As such, we recognise that we have a duty to keep tax as low as possible to reduce its burden, most especially on the poorest in our society, and so protect living standards and nurture a thriving economy.”
“New clause 15 would require the Government to publish a report on the consultation that we have undertaken on some of the measures in the Bill. The Government are committed to creating a more predictable and stable tax system. Our move to a single fiscal event timetable and the new tax policy-making process ensure that there is more time available to consult on new tax changes. In July, we published draft legislation or detailed technical notes on the majority of the measures covered by the clauses in this group to allow for consultation with interested parties. However, that approach is simply not appropriate for all tax avoidance and evasion measures. Publishing draft legislation can give those targeted by legislation the opportunity to make provision to sidestep it.”
“The tax information and impact notes published alongside the measures already set out the impact of anti-avoidance measures in the Bill on those sharing protected characteristics. In general, they show that HMRC does not expect the measures to have notably different impacts on people according to their protected characteristics. New clauses 6 and 14 would require the Government to publish a review of the effectiveness of the Bill’s provisions to tackle tax avoidance and tax evasion, and to reduce the tax gap. Such a review is unnecessary. The Government keep all taxes under review and will continue to measure and publish annual statistics on the tax gap. I have little doubt that those statistics will continue to show that the tax gap is lower than at any time under the previous Labour Government.”
“Opposition amendments 3 and 4 would require the beneficiary of a trust that pays capital gains tax on an instalment basis to provide information about the source of its income in a public register. That requirement is disproportionate and unnecessary. Migrating trusts seeking to use the scheme will have paid UK tax, so their income sources will have been declared to HMRC. Information about the nature of the trust’s assets will also be held on the trust register, which applies to trusts with a UK tax liability and is available to law enforcement agencies. Consequently, there is no need for further reporting. New clause 5 would require the Government to carry out a review of the equality impact of some of the Bill’s anti-avoidance provisions.”
“As we depart from the EU, we must continue to honour existing commitments. That is why we are allowing capital gains tax in respect of exit charges to be paid in instalments. Exit charges can arise on unrealised capital gains when a trust ceases to be UK resident, or if a non-resident individual either ceases to trade through a UK branch or agency or moves trading assets abroad. Exit charges ensure that tax cannot be avoided by moving assets overseas. Clause 22 retains those rules. However, when such entities choose to move their place of residence within the European economic area, they will now be given the option to defer the payment of tax, paying in six equal annual instalments with interest, which will not reduce the amount of tax that is due.”
“That information will allow HMRC to build up the full picture of such arrangements. Following a consultation next year, the Government will introduce secondary legislation containing further details of the rules. We have played a leading role in designing that approach, which forms part of our ongoing work to champion international tax transparency and to tackle offshore tax avoidance and evasion. Amendment 23 would require the Government to publish a report on how clause 83 will be exercised under various EU exit scenarios before making the proposed regulations. However, the Government are already committed to a formal consultation on the proposed regulations, and all practical aspects of implementing the regulations and EU exit will be taken into consideration as part of that consultation.”
“Amendment 19 would provide for a review of the changes required to the controlled foreign company rules, which protect against the artificial diversion of profits from UK companies to low-tax jurisdictions, including with regard to the impact of a no-deal scenario. While the Government always keep the general tax system under review, a specific review of those provisions would be disproportionate. They are minor changes to ensure that the UK’s anti-avoidance rules on controlled foreign companies are fully aligned with the direction with which the UK agreed during negotiations on the anti-tax avoidance directive, and there is no need for a review. Clause 83 enables the introduction of new international rules requiring tax advisers to report to HMRC certain cross-border arrangements that could be used to avoid or evade tax.”
“The Bill will ensure that businesses that typically trade in and acquire shares pay the correct level of stamp duty on those shares, rather than paying a certain market rate having transferred the shares, perhaps internally to another company in the same group, in return for shares from that other company that had been valued at a lower level compared with the original purchase price of the original shares. By doing that, some companies have been exploiting a loophole and paying less stamp duty than they would otherwise have done. In case the hon. Gentleman is wondering, the distinction between the two clauses relating to this matter is that one relates to paper shares and the other to the electronic trading of shares in that manner.”
“We have had a good, rounded and full debate, and I thank all Members for their contributions. I wish to touch briefly on the amendments and new clauses moved this evening. New clause 5 calls for a review of the impact of the clauses in this group on child poverty, on households at different levels of income, on those with protected characteristics and on the different parts of the United Kingdom. As I have stated, the Government already provide impact and distribution assessments and analysis in the Budget, as well as tax impact information and notes on individual tax measures.”
“I was just going to say that, as the hon. Lady will know, all amendments need to be in scope and that that is ultimately a decision for Mr Speaker. I am sure that he has taken the appropriate decisions in this case— [Interruption . ]”