Clause 220 - Disclosure of tax avoidance schemes

Finance Bill – in a Public Bill Committee am 2:15 pm ar 20 Mehefin 2013.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury) 2:15, 20 Mehefin 2013

I beg to move amendment 147, in clause 220, page 129, line 6, at end add—

‘(2) The Chancellor of the Exchequer shall consider what steps Her Majesty’s Government could take, in co-operation with developing country governments, to assess how UK companies could report their use of tax use schemes that have an impact of developing countries, and how the UK could assist in the recovery of that tax. He shall report on this issue to Parliament within six months of Royal Assent.’.

Photo of Sir David Amess Sir David Amess Ceidwadwyr, Southend West

With this it will be convenient to discuss clause stand part.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

Clause 220 relates to the disclosure of tax avoidance schemes—or DOTAS—provisions that were introduced by the then Labour Government in 2004, which are a very welcome tool for HMRC in the battle against tax avoidance and evasion. Committee members will know that DOTAS requires certain persons—normally a scheme promoter—to notify HMRC and provide information about tax avoidance schemes that they are intending to promote or use. That provides HMRC with early warning of new schemes and the opportunity to consider changes in the law to close loopholes or to challenge the scheme if it does not agree with the tax effect claimed.

The clause enhances DOTAS by providing HMRC with additional powers and the ability to request further information. We support the measures, given that the success that DOTAS provisions have had to date. However, as stated during our consideration of clause 75, the total amount of revenue protected by DOTAS had reached £12.5 billion by March 2012 with about 2,200 avoidance schemes having been identified by HMRC.

During our discussions on clause 75, I asked the Minister for an update on the figure. It was not available at the time, but I should be keen to be made aware of it now. Given that we have figures only up to March 2012, it would be useful to have an updated figure at this juncture. As well as benefiting the UK Exchequer, we believe that the disclosure provisions could have a significant impact on developing countries to increase their tax take, as suggested under amendment 147. There would be enough food for everyone if campaigners made it clear that developing countries lose an estimated $106 billion per year due to tax dodging by multinational companies.

Poor countries struggle to access the information that is needed to counteract tax avoidance by foreign nationals and multinational corporations, as information about foreign taxpayers’ overseas assets, income and cross-border transactions is simply unavailable within their jurisdictions. It is clearer that greater disclosure of such information is required, and the United Kingdom could—and, we believe, should—be leading the way by taking steps to help reduce tax avoidance by British companies that operate in developing countries.

As members of the Committee will recall, the Opposition tabled an amendment to the Bill when it was considered in Committee of the whole House. It called on the Government to extend the DOTAS requirements so that they incorporate the use of tax avoidance schemes by UK companies that have an impact not only on UK revenues, but on developing countries. However, along with the response that we have received about the impact of the CFC role changes on developing countries, the Minister gave a similar lacklustre response by saying the answer is that,

“as a matter of practicality it is difficult for HMRC to perform the roles required by the developing countries. That takes us  outside what HMRC can realistically do.—[Official Report, 17 April 2013; Vol. 561, c. 447.]

The Opposition have therefore decided to give the hon. Gentleman another opportunity to make the right decision and accept amendment 147. It calls on the Chancellor to consider what steps the Government could take in co-operation with developing country Governments to assess how UK companies could report their tax schemes and have an impact on developing countries, and how the UK could then assist in the recovery of that tax.

Once again, we do not want to hear from the Minister about what is impossible for the Government to do. The issue merits a better response. The Government should therefore think about what they can do rather than what they cannot do, instead of dismissing the suggestion out of hand. I am sure that the amendment would at least enjoy the support of the Liberal Democrat members of the Committee, given that their party’s spring conference passed a motion effectively calling for the same policy. They now have the opportunity to put their money where their mouth is and vote for the amendment to make a real difference, potentially, to developing countries’ ability to protect their tax base.

Photo of Stephen Williams Stephen Williams Democratiaid Rhyddfrydol, Bristol West

I assure the Opposition Front Bench that I support the Chancellor’s considering what steps Her Majesty’s Government should take in co-operation with developing country Governments to put effectively into place what was decided at Lough Erne. An amendment is not needed to do that because it is fairly clear from what the Exchequer Secretary said, what the Prime Minister said, what the Chancellor said and what the Deputy Prime Minister has said during the past few days and, indeed, over the past few months as we have built up to what happened at Lough Erne, that the mood music has completely changed in this area.

Not that long ago, discussing tax avoidance was considered dull and boring and something that only dull and boring former chartered tax advisers and Ministers would do together at dark moments in receptions with the Chartered Institute of Taxation or other events that the Exchequer Secretary and I have attended over the last eight years. Suddenly, it has become a mainstream political campaign advocated with passion by Christian Aid and Action Aid and the other people in the IF campaign coalition. The political mood music has completely changed now. I just wish that the Opposition Front Bench could acknowledge that that has happened and could welcome it. This really should not be a silly, party political, bickering game, particularly on the last afternoon of this Bill.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury) 2:30, 20 Mehefin 2013

The hon. Gentleman once again is selectively hearing. I paid tribute to the progress that had been made. I acknowledged that they were steps in the right direction and steps that we all welcomed wholeheartedly. I fundamentally dispute the tone that he is taking towards this. I would also advise him to be cautious in rejoicing at the change in mood music as opposed to concrete action on the ground, which he has the opportunity to put into legislation today.

Photo of Stephen Williams Stephen Williams Democratiaid Rhyddfrydol, Bristol West

The first thing that needs to happen in politics for any fundamental change to happen, whether it is domestic or international change, is for that mood music to change. There has to be a will in this country to make that change. That will is definitely now in place and it has to be extended abroad by persuasion in all the international forums in which the United Kingdom takes part. We are fortunate as a country to have a seat in many international forums where we can influence the decisions of other Governments, whether it is within the European Union, with the United Nations or where the nitty-gritty of the implementation of a lot of the work that was decided at Lough Erne takes place within the OECD. That is where the dry, technical work will have to be done, thrashing out all the changes to all the treaties, all the bilateral treaties that, yes, I know the last Labour Government set up between some countries.

Photo of Stephen Doughty Stephen Doughty Llafur, De Caerdydd a Phenarth

A moment ago the hon. Gentleman mentioned Action Aid, Christian Aid and many of the other organisations that have been campaigning for these measures. In the last 20 minutes I have received about 20 different tweets and messages from people urging just the sorts of things that are in this amendment. Many are from Action Aid and Christian Aid supporters. I contend that people will judge him and the Tory Government quite harshly for not accepting this reasonable amendment to strengthen the measure, which has already done a lot, as we have discussed.

Photo of Stephen Williams Stephen Williams Democratiaid Rhyddfrydol, Bristol West

That may sound very clever, but may I say quite gently to the hon. Gentleman, as I do quite like him, that this is a really serious issue. Trying to turn it into a party political, point-scoring exercise when it is supported by constituents who vote for all three main political parties—all four in Wales—and is supported by people who go to church, people who do not go to church and people who support one charity or another, does not show any of us in a good light when there has been fundamental change in this area.

Photo of Brooks Newmark Brooks Newmark Ceidwadwyr, Braintree

I am not into political point-scoring and I am not even particularly Christian. [ Interruption. ] Yes, that is because I am Jewish. But Christian Aid has a point in what it is saying. There was some pretty strong messaging at the G8. It is important that the Government listen. Some of the language in the new clause is not unreasonable. I hope that when the Minister sums up he will demonstrate that he has listened to groups such as Christian Aid, which makes some valid points, and reflect its concerns and perhaps answer some of them. The G8 has raised the importance of this issue even higher.

Photo of Stephen Williams Stephen Williams Democratiaid Rhyddfrydol, Bristol West

I entirely agree with what the hon. Member for Braintree said. I was about to say something remarkably similar myself. Lough Erne is a major breakthrough, in particular paragraphs 1 and 4 of the main declaration. Paragraph 1 states:

“Tax authorities across the world should automatically share information to fight the scourge of tax evasion.”

Paragraph 4, which is of particular relevance here, states:

“Developing countries should have the information and capacity to collect the taxes…and other countries have a duty to help them.”

Obviously, the other countries are primarily the original G7 members of the G8, where many of the multinationals are headquartered. Multinational companies are quoted on stock exchanges as having primary relations with those tax authorities. If our country gets from multinational companies a disclosure of their tax avoidance operations in other countries, as well as what they seek to do in this country, that information should automatically be exchanged with developing countries, as paragraph 4 of the Lough Erne agreement states.

A major breakthrough was made at the G8. I was pessimistic in the run-up to the G8. Often for issues on which international co-operation is needed, such as climate change, there is a big campaign, which we all support; we attend rallies outside Parliament, and hope the United Kingdom Government will do the right thing.

Photo of Chris Evans Chris Evans Llafur, Islwyn

The hon. Gentleman is a Liberal Democrat; he has never been to a rally.

Photo of Stephen Williams Stephen Williams Democratiaid Rhyddfrydol, Bristol West

Don’t be daft. But at the summit, either the United States or India pulls the rug from under the international agreement at the last minute—[ Interruption. ] I cannot hear the hon. Gentleman. At the international summit one country is the obstructing force, and everyone else’s hopes are crushed.

That did not happen at Lough Erne. A major breakthrough was made, and the developed countries said that they would take tax evasion and tax avoidance seriously. It is not just about our own selfish interest, important though that is—it is this Committee’s primary duty to defend the UK’s tax base, which we should not forget. Altruistically, we must realise that it is in the interests of a humane world that we help developing countries to protect their own tax bases.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

The hon. Gentleman is making a moving speech about the importance of international co-operation on taxation issues. He certainly seems to be talking the talk. The issue today is that we are calling on the Government to consider action that could be taken domestically by the UK now that would make a difference to developing countries. It is all well and good talking about how it works on an international scale, but this is a UK measure that could make a difference today. The hon. Gentleman has the power to do it.

Photo of Stephen Williams Stephen Williams Democratiaid Rhyddfrydol, Bristol West

Indeed, I am talking the talk. I have been talking the talk for a long time—longer than some hon. Members who have been shouting at me. Talking the talk is what we do as politicians; it is how we get a consensus among ourselves. We do it in parliamentary Committees such as the International Development Committee, which is chaired by a Liberal Democrat, my right hon. Friend the Member for Gordon (Sir Malcolm Bruce), who has done important work in this area. That is how we get, slowly but surely, to agreement among ourselves. We then persuade our international partners to come on board.

Photo of Brooks Newmark Brooks Newmark Ceidwadwyr, Braintree

I am in uncomfortable territory here, because I am sympathetic to what the hon. Member for Newcastle upon Tyne North said and I disagree with  the language that my hon. Friend used. He said that we had an altruistic reason for doing this, but it is nothing to do with altruism; it is a moral responsibility. If companies deliberately avoid paying taxes that are due to countries that are in a far worse economic condition than ours, we have a moral responsibility to ensure that that money reaches those poor countries. They deserve that money. It comes from those countries, and it should not be transferred by sophisticated accountants through transfer pricing away from them. They sorely need the money that is due to them through taxation.

Photo of Stephen Williams Stephen Williams Democratiaid Rhyddfrydol, Bristol West

I do not disagree with that at all. Altruism and trying to roll out a global, ethical moral tax framework are essentially all about the same thing. That is what we are edging towards.

The double tax treaties that we have talked about so many times were put together by the League of Nations; that shows how old they were. That was an imperial age. As I said to the Prime Minister in response to his statement yesterday, the mentions of forestry, quarrying, and the signatory powers of overseas agents are from a different age, when there was a different moral code and it was considered right that developed countries should exploit other countries. In fact, not only should they exploit other countries’ resources, they should have treaties to ensure that they were not taxed twice in developing countries between the United States and the UK. That is the origin of all these treaties.

We are now changing that expectation and saying that the double tax treaties that have meant in practice that nobody pays tax anywhere—money is siphoned off into tax havens—are not acceptable. Not paying tax is not acceptable in London and it is not acceptable in Washington. It is not acceptable in Berlin, Paris or any of the great former imperial powers that composed the original treaties. It is also unacceptable in the Democratic Republic of the Congo, Ghana and everywhere else.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

The hon. Gentleman is focusing very much on the international taxation system. Will he clarify exactly what it is about amendment 147 that he feels he cannot agree to? It does not look at the international tax system; it looks at our UK tax processes and at a disclosure scheme that is already in place, which we know is incredibly effective in securing UK tax revenues. The amendment asks the Government only to look at how that can be extended to support developing countries. The amendment would not legislate for that to happen, but simply asks the Government to look at the possibility. If the hon. Gentleman could explain what it is about the amendment that he cannot agree to, that would be helpful.

Photo of Stephen Williams Stephen Williams Democratiaid Rhyddfrydol, Bristol West

I said earlier, either in response to an intervention or in my remarks, that I did not disagree with the sentiment in the amendment at all. However, as I have tried to do over many months and years, I am trying to build a consensus on this issue. I think that the hon. Lady, perhaps guided by forces of darkness outside this room and further away in her own party, is trying to sow division. We should not be divided over this issue. There should not be a dividing line between her party, my party and the Conservative party; this should be something on which we agree. We should be collectively  pleased that our Government have led the way in the international community in getting this issue on to the agenda.

The hon. Lady and her colleagues are indulging in parliamentary games. I doubt that anybody in the Committee disagrees with the amendment. We will hear shortly from the Minister, who knows very well that his coalition partners and many of his own colleagues have a high expectation of him. That has now been eloquently expressed twice by the hon. Member for Braintree, who is a very economically dry person—he is probably somewhere different from me on the political spectrum. He, too, expects the Exchequer Secretary to say that the Chancellor and all the Treasury Ministers are seriously considering how to put into practical effect what was negotiated and agreed at Lough Erne.

Photo of Chris Evans Chris Evans Llafur, Islwyn

I am listening to the hon. Gentleman’s speech, and my mind harks back to the presidential election of 1980, when Ronald Reagan turned to Jimmy Carter and said, “There you go again.” Only a Liberal Democrat can stand up and when for all the world we believe he is going to vote for the amendment, and we know he is going to speak in support of it, he does the exact opposite. I ask the hon. Gentleman for a one-word answer. Does he support the amendment—yes or no? Perhaps then we can cut down his soliloquy a little.

Photo of Stephen Williams Stephen Williams Democratiaid Rhyddfrydol, Bristol West

I repeat, probably for the third time: I agree with the amendment. That does not necessarily mean—

Photo of Chris Evans Chris Evans Llafur, Islwyn

Well vote for it then.

Photo of Stephen Williams Stephen Williams Democratiaid Rhyddfrydol, Bristol West

When the hon. Gentleman has been here a bit longer, he will realise that these are the games that Opposition parties play. I know, because my party probably did it as well, as did our coalition colleagues. The duty of an Opposition is to try to embarrass the Government. I would say that on this issue, it is actually quite hard for the Opposition to embarrass the Government, because the Government have moved so far. The hon. Lady said that she welcomed the steps that had been taken. I would say that these are rather more than steps; these are enormous strides towards a consensus among the big countries that something needs to be done.

Photo of Brooks Newmark Brooks Newmark Ceidwadwyr, Braintree 2:45, 20 Mehefin 2013

I have been listening to the hon. Gentleman, and I have heard the passion with which Members on the Opposition Front Bench have been pushing their point, with which they know I am somewhat sympathetic. But if they had really felt the amendment was important, they would have ensured that more than 50% of their Committee members turned up.

Photo of Stephen Williams Stephen Williams Democratiaid Rhyddfrydol, Bristol West

I give way, because the hon. Member for Cardiff South and Penarth is getting impatient.

Photo of Stephen Doughty Stephen Doughty Llafur, De Caerdydd a Phenarth

With respect to the hon. Member for Braintree, I believe that a number of members of the Committee are speaking in a debate on the Floor of the House. [Hon. Members: “On Scotland?”] On Scotland. They cannot speak about two important issues at the  same time. I simply do not understand the argument that the hon. Member for Bristol West is making in support of his decision not to vote for the amendment. I say with all sincerity that the amendments were not tabled to play political games. They were tabled to do the job that an Opposition are supposed to do, which is to hold the Government and the governing parties to account for promises that they make at places like the G8 summit.

I refer again to the comments made at the G8 summit, where the participants said very clearly that it was about ensuring that

“international and our own tax rules” were correctly configured to deal with these issues. The amendment is not out of kilter with the G8 declaration, or with principles or policy that have been put forward before; so why not support it? It is being put forward in all sincerity.

Photo of Stephen Williams Stephen Williams Democratiaid Rhyddfrydol, Bristol West

The hon. Gentleman will know from all the Bill Committees that he serves on that amendments are tabled, whether by Government MPs or Opposition MPs, to get the debate going and to get statements on the record from the Minister. And these words are important. This is how a lot of this agenda was moved forward in last year’s Finance Bill Committee. We are light years away from where we were when we were discussing CFCs in last year’s Bill Committee, and that should be welcomed. The amendments are important to provoke discussion, to get agreement, to get the Minister’s words into Hansard, and I am fairly confident that that is what we will get today.

Photo of Sheryll Murray Sheryll Murray Ceidwadwyr, South East Cornwall

Given the view of the Opposition, does the hon. Gentleman agree that they had 13 years to get this right?

Photo of Stephen Williams Stephen Williams Democratiaid Rhyddfrydol, Bristol West

And in that 13 years—to be fair and objective to them because, as I said, I was trying to get consensus on this issue because it should not be the subject of a domestic political divide—they did some good things. For instance, the first Blair Government responded to the Jubilee 2000 campaign and worked internationally to cancel out accumulated debt in many developing countries—at a time, I should point out, when this country had a budget surplus and economic growth. The present Government are almost doubling our overseas aid budget in the Department for International Development and we are in quite a different political position. So both the first Blair Government and this coalition Government have been doing good things. We are doing good things in rather more pressing economic circumstances at home.

I will conclude by saying that there should be a consensus on this issue. The Minister now has the difficult task of trying to build that consensus and give everyone in the Committee full confidence that he and all his ministerial colleagues will live up to the promises made by our country’s leader and other country leaders at Lough Erne, and in particular that we do now recognise, whether for altruistic reasons, ethical reasons or moral reasons, that we should help developing countries to tackle tax avoidance in their countries as well as tackling tax avoidance in our own.

Photo of David Gauke David Gauke The Exchequer Secretary

Clause 220 is about changes to the disclosure of tax avoidance scheme regime—DOTAS. The clause ensures that the information HMRC receives under DOTAS is accurate and can be more easily matched with the records of individual taxpayers. It also allows HMRC to obtain better information about the user of an avoidance scheme. First, it allows HMRC to get from the users their unique taxpayer reference and national insurance number. Secondly, where a promoter uses an intermediary, it requires the promoter to tell HMRC about users of its scheme sold by that intermediary.

Before turning to the amendment tabled by Opposition Members, which has excited a lengthy debate this afternoon, it may help if I set out some background to the clause. DOTAS requires certain persons, normally the scheme promoter, to provide HMRC with early information about the tax avoidance schemes and their users. It identifies avoidance schemes using certain criteria called hallmarks. Some hallmarks are generic, while others are specific to a particular tax. Hallmarks are updated to reflect trends in avoidance and to improve the information received on avoidance schemes.

As currently designed, DOTAS has been successful. Between its introduction in 2004 and the end of March 2013, it resulted in 2,300 avoidance schemes being disclosed to HMRC. That in turn has led to more than 60 changes in tax law to stop avoidance. It has also contributed to a general reduction in marketed tax avoidance.

However, there is room for improvement, as the Government recognised when we published, “Lifting the Lid on Tax Avoidance Schemes” in July 2012, a document that included proposals for HMRC’s anti-avoidance strategy. The proposals covered a wide range of issues, including the proposals in the clause, many of which we are taking forward separately. The consultation was well received and the means of obtaining the additional information are before us in the clause. Later on this year, regulations will be laid to update the hallmarks.

One area in which we wish to strengthen DOTAS is the information that promoters of tax avoidance schemes have to provide. Currently, when a tax avoidance scheme is notified under DOTAS, HMRC should receive a list of the clients to whom the promoter has sold the scheme, known as the client list. The list includes names and addresses, but sometimes that is not enough to enable HMRC to trace all users of the scheme.

There are various ways in which the information can fall short; for example, there may be more than one person at an address with the same initial and name, or the client may have used a business or c/o address. The changes made by the clause will mean that most if not all users of a scheme will be able to be matched to their tax record. That will be achieved by regulations requiring promoters to provide HMRC with the unique taxpayer reference and national insurance numbers of their clients. In addition, if a promoter has provided information about an intermediary selling its schemes instead of the end user, the clause will require the promoter to tell HMRC about the end users of the scheme.

After Royal Assent, the clause will be supplemented by new hallmark regulations, which will be laid under an existing regulation power. The regulations were consulted on at the same time as the draft clause, and I have provided hon. Members with the current version.

I was asked for an updated breakdown for money on DOTAS. I cannot yet provide an update on the numbers that I have given. Hon. Members will be aware that anti-avoidance measures announced at Budget 2013 raised more than £1 billion by the final year of the scorecard period, but it is not possible as yet to break that down to sums attributed to DOTAS and sums that are not.

Amendment 147 would require the Government to consider the steps they could take to assist developing countries’ efforts against tax avoidance and to help them recover any tax due, essentially by extending the DOTAS regime internationally. We have already debated a number of times our efforts to assist developing countries to strengthen their tax regime. There is no doubt that there is a consensus in the Committee that we should be doing that.

I am able to provide an example. Let me be the first to say that that builds on work that goes back to 2002, so there is cross-party consensus. To build capacity in the Ethiopian Revenue Authority, HMRC has helped to strengthen the accountability, political neutrality and transparency of revenue collection in Ethiopia. From 2002 to 2011, which is the most up-to-date number that I have, tax collected in Ethiopia increased by 700% in absolute terms. That is considerable progress. I could give other examples.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

I apologise if the Minister was going to go on to deal with what I have to say. It is useful to hear about capacity building and other successes, but I have made it clear that they will not be enough to change the fact that developing countries still lose three times more in avoided tax than we give in aid, which includes capacity-building assistance. We tabled the amendment because it would use the tools at the UK’s disposal to make a real difference to developing countries’ tax receipts.

Photo of David Gauke David Gauke The Exchequer Secretary

I want to be clear, and I hope the whole Committee will accept this, that there is no disagreement over there being a role for the United Kingdom to play in supporting developing countries to reduce tax evasion and tax avoidance. Clearly, strong, effective, competent and honest tax authorities can play a hugely important part in helping developing countries to develop; the difference is over how we go about doing that. I appreciate that nobody is saying that we should not assist with capacity building, but I want to bring it to the Committee’s attention that there is much we can do, in practical terms, to help.

The amendment proposes that DOTAS be extended internationally. The reason for my concern is similar to that which I expressed in my argument on CFC reform. HMRC is not well designed to enforce the tax regimes of other authorities, because it does not have the same understanding of other tax codes as of the UK code. If I may, I will pray in aid Richard Murphy, whom I rarely support. The hon. Member for Newcastle upon Tyne North will be familiar with him. He is close to the NGOs and is a campaigner in this area. It would be fair to say that he and I do not always, or even often, agree on many such matters, and that both of us have been critical of each other. I do not think he will take any particular pleasure from my praying him in aid on this point. His politics are somewhat to the left of those of  the Labour party, of which he is sometimes critical on tax matters. On the specific proposal to extend DOTAS internationally, he wrote on his blog a few days ago:

“I admit, I have never seen how extending DOTAS internationally could work. I can’t see how HMRC could know if they got accurate data, or none at all and as such can see no way such a scheme could be enforced in which case I admit I can’t see how it could ever be workable.”

That is the problem. No one doubts the good intentions behind the idea. The IF campaign has called for it, and I take it that that is why the Opposition tabled the amendment, the issue behind which has been raised in the past. However, is extending internationally DOTAS, which is about dealing with tax avoidance schemes under the UK tax system, something that HMRC can deal with effectively? The Government believe the answer is no. When there is consensus between me and Richard Murphy, that is a pretty broad consensus.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury) 3:00, 20 Mehefin 2013

One might interpret it as a broad consensus, but it might be perceived as mischievous that the Minister disagrees with most of what Richard Murphy says but now says that he speaks eminent sense about one thing. One could question the Minister’s use of him to defend the Government’s position.

Point 4 of the Lough Erne declaration states:

“Developing countries should have the information and capacity to collect the taxes owed them—and other countries have a duty to help them.”

Our amendment merely asks the Government to consider how they could extend the DOTAS scheme to exchange information; it may be only that. On a number of occasions today, the Minister has stated the Government’s commitment to an automatic exchange of information with other G8 countries and, more widely, with developing countries. Are the Government not even prepared to consider the possibility that the DOTAS scheme, perhaps not operating in the same way as in the UK, could be used for the provision of automatic exchange of information for developing countries? The amendment asks the Government to look at how things can be used rather than looking at what cannot be done, which is what the Minister seems to be focusing on.

Photo of David Gauke David Gauke The Exchequer Secretary

I am not claiming, by any means, that everything Richard Murphy says is correct; I am saying that if even he thinks that such an idea is not workable, there is some reason to doubt that it is workable.

Of course we need to do more to build up the capacity of developing countries so that they have information—I entirely agree with that—but worldwide application of the UK regime on the disclosure of tax avoidance schemes regime is simply not workable. HMRC would not be able to enforce it and, much though we all want to do more to help, in those circumstances it would not help us to deal with the tax gaps in those countries. I fear it would be a bit of a cul-de-sac.

Photo of Brooks Newmark Brooks Newmark Ceidwadwyr, Braintree

I continue to be sympathetic to the comments of the hon. Member for Newcastle upon Tyne North; I say that with all sincerity. We have heard what the Prime Minister is trying to do to create a much  more transparent tax system internationally to help developing countries. It would be helpful if, rather than simply saying what we cannot do and what we are limited by, the Minister accepted the gist of the hon. Lady’s question: is there something we can do to try to help developing countries by creating a much more transparent system internationally? That is what both the Prime Minister and the Chancellor want.

Photo of David Gauke David Gauke The Exchequer Secretary

Indeed. My hon. Friend will be aware that I have set out at some length what we have done to reform the tax system so that there is greater automatic exchange of information. We need to make sure that developing countries can benefit from that, as set out in the Lough Erne declaration. We have taken steps to build up the capacity of developing countries, but we have to remember that the DOTAS regime is not about exchanging information. There are other ways in which we can do that, and in recent days we have made progress on automatic exchange of information and on making sure that developing countries have tax authorities that can make use of that information. There is more work to be done; to be honest, we must work much more widely, to ensure that those countries have tax authorities that can collect tax. I have made it clear that the Government strongly support that.

The difficulty here is not the motivation behind the amendment or the desire to deal with tax avoidance in developing countries. It is right that we try to do that and it is good that we have had this debate. However, as a matter of practicality, tax experts from the left have accepted that to extend the UK DOTAS regime internationally would not be the right way to act. For those reasons I request that the amendment is withdrawn and that hon. Members do not support it. I do not feel that the amendment would help developing countries do what we all want them to be able to do, namely to collect taxes.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

Will the Minister confirm whether HMRC and the Treasury have already fully considered the possibility of extending DOTAS to disclose information to developing countries—beyond its current UK remit—and discounted it, following a thorough review?

Photo of David Gauke David Gauke The Exchequer Secretary

It would be fair to say that we are evaluating the use of DOTAS more generally, but the system is essentially for the UK tax system and there are real problems with extending enforceability to developing countries’ tax regimes. If enforceability could be addressed, it is not a theological point. As a pure matter of practicality, we do not believe that DOTAS is the right route.

That is not to say that there are not other routes—I will conclude on this point—because there are of course things that we can do in developing countries, such as the treaties that we have agreed and encouraged others to participate in. We have put beneficial ownership on the international agenda. We are assisting developing countries in building their capacity and encouraging others to take that approach as well. All those things are significant, but on the narrow point of whether DOTAS is the right route, we do not see that as enforceable or workable. Rather than devoting a lot of time and effort to that, tying up resource that could instead be used on capacity building and on ensuring that we can provide some practical help to developing countries, I urge the hon. Lady to withdraw her amendment.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

We have had an interesting and lively debate. There seems to be a fair amount of consensus on the principle that we are debating, but the sticking point is the commitment to look properly at it. The Minister did not respond to my question, which was: have the Government fully considered whether and how the scheme could be extended, for the purposes that we all agree may have a beneficial impact for developing countries? Had he given me a clear reply, we would no longer require the amendment, but I am not convinced that the Government have fully considered the issue. There is no transparency or public record to show that the Government have given full consideration to how DOTAS could be extended in line with the principles and action plan set out following the Lough Erne agreement at the G8.

An English proverb sprang to the mind of my hon. Friend the Member for Nottingham East: “Fine words butter no parsnips.” I think that is very apt. We all express our intentions to make a difference on this matter for developing countries, but we have to walk the walk and commit in legislation to undertake a review on how DOTAS could be used in a way that many people believe would be beneficial. The Government should be transparent about whether they have fully considered that and how that extension could be dealt with. We should stop focusing on what we cannot do and start focusing on what we can do as a country to make a serious difference to developing countries. We will press the amendment to a vote.

Question put, That the amendment be made.

The Committee divided: Ayes 10, Noes 14.

Rhif adran 11 Decision Time — Clause 220 - Disclosure of tax avoidance schemes

Ie: 10 MPs

Na: 14 MPs

Ie: A-Z fesul cyfenw

Na: A-Z fesul cyfenw

Question accordingly negatived.

Clause 220 ordered to stand part of the Bill.