Clause 9 - GAAR to apply to national insurance contributions

Part of National Insurance Contributions Bill – in a Public Bill Committee am 2:45 pm ar 21 Tachwedd 2013.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Shabana Mahmood Shabana Mahmood Shadow Minister (Treasury) 2:45, 21 Tachwedd 2013

I think that is quite enough discussion about Wikipedia, but I am grateful to the hon. Gentleman for giving me the opportunity to set the record straight.

I am sure the Minister did not mean to forget about the disclosure of tax avoidance schemes in his response to the hon. Member for Skipton and Ripon. I am sure his amnesia was only temporary and that he will remember that, in 2004, the Labour Government introduced that process to require disclosure. As a result of the information obtained from that, 90-odd changes to tax law were made. The Government are building on that process, which has led to a recovery of revenue in the range of £16 billion and has had a profound impact on tax avoidance in this country. It has certainly recovered a great deal more than the Government’s estimate of how much the GAAR will yield, which is only £85 million a year by 2017-18. In the context of the £16 billion raised by the disclosure of tax avoidance schemes, that is a very small amount. The thrust of the GAAR ought to be to close the tax gap, but given that that is in the £35 billion range, the GAAR’s contribution to that will be very small. One of our problems with the GAAR is that its scale is so small that it will not do enough to close the tax gap.

As the Minister knows, there are no penalties for using a scheme to which the rule might be applied, so there is little or no disincentive for anyone who seeks to avoid tax. The GAAR is in danger of becoming a mere fig leaf to which the Government can point to say they are doing something about tax abuse and avoidance. However, in reality, it will not change the picture profoundly. It will certainly not go as far as the disclosure process that we introduced in 2004, which made a much greater contribution to closing the tax gap.

As the Minister considers the GAAR, which I am sure, like everything else, he keeps under constant review, I hope he will take on board the points that have been made about its effectiveness. A Government scheme for closing down tax avoidance should do more to close the tax gap than he estimates his policy will.