Finance Bill

I join others in congratulating the hon. Member for Lincoln (Karl McCartney) on his maiden speech. He launched some important claims on behalf of his constituents. I was interested in the case that he made for reintroducing indexation and taper relief on capital gains tax. I suspect that these debates will gain a new currency, given the increase in the rate of capital gains tax that the Bill introduces. I also welcome the evidence of independent thinking that he showed the Committee today, and I appreciate, as many will, his generous remarks about Gillian Merron, who was certainly a very popular Member of the House, as well as a popular feature in the local press in the hon. Gentleman's constituency. I am grateful to my hon. Friend the Member for Hayes and Harlington (John McDonnell) for raising this issue. He has done us a service by raising some important points. I do not agree with his criticism of the previous Government in that respect, as I shall explain, but it is right that we should have this debate in this part of our consideration of the Bill. I enjoyed listening to what the hon. Member for South Staffordshire (Gavin Williamson) said a moment ago. What he was saying, I think, was that he was expecting the new Government to simplify the tax system. Well, maybe, although I do not think that there is much simplification in the Bill. In fact, there is a major new complication, as we will see when we come to clause 2. For the first time ever, the rate of capital gains tax is being changed in the middle of a year. That is a significant new complexity that the Bill introduces. Although I am touched by his faith, I suspect that he might find himself somewhat disappointed as time goes on. My hon. Friend the Member for Hayes and Harlington was right to pay tribute to the work of Richard Murphy and the tax justice campaign. I want to pay particular tribute to Richard Murphy for developing, and first arguing for, the idea of country-by-country reporting. We are debating the avoidance, and indeed evasion, of corporation tax, and of course, that is a matter not only for the UK but for developing countries on a large scale as well. Richard Murphy was the first person to argue that companies should report, on a country-by-country basis, the profits that they make in each country and the tax that they pay in each country, so that everyone can see if there is a mismatch between the two. The previous Government supported that call, and I am pleased that the OECD is taking the matter up. I think that we are now going to see some progress on that front, thanks to Richard's efforts. I note from his blog that he has been on the receiving end of some unwarranted online harassment recently on account of his work. I certainly wish him well in what he is doing. However, I am not entirely persuaded by his criticism, or that of my hon. Friend the Member for Hayes and Harlington, of the work of HMRC on the tax gap. As my hon. Friend rightly mentioned, however, it is inevitable that any estimates in this area will be uncertain because no one knows precisely what is being hidden from the tax authorities. Narrowing the tax gap was an important priority for the previous Government, and I was grateful for the comments made by the hon. Member for Southport (Dr Pugh) and by the Minister in the debate on tax avoidance that was held in Westminster Hall on 14 June. In that debate, my hon. Friend the Member for Wallasey (Ms Eagle) set out the key elements of the progress that the previous Government had made on tackling the problem of avoidance. One of the initiatives that we took was to propose a voluntary code of practice for the banks, and I hope that the Minister will be able to tell us more about this when he winds up the debate. My hon. Friend the Member for Leeds East (Mr Mudie) mentioned one of the banks a few moments ago. The idea was that banks would sign up to the code of practice and, in doing so, would agree to stick not only to the law on the payment of taxes but to the spirit of the law as well. Having listened to the arguments put forward by the right hon. Member for Wokingham (Mr Redwood), I imagine that he would be opposed to that initiative, because he would feel that it should simply be a matter of asking, "Are you or are you not complying with the letter of the law?" and that, if a problem arose, the Government should legislate to close the loophole. The problem with that approach is that we can get into an arms race, as we have certainly done on many occasions, in which the Government and Parliament agree on changes to the law and everyone knows perfectly well what they mean, but the banks then commission ingenious accountants to find ways round the spirit of the law, even though the letter of the law is being complied with. If we were to stick with the approach for which the right hon. Gentleman is arguing, Parliament would then have to close the loophole, perhaps a year later, and the circle would continue to go round. He made an interesting case, but we have to find a way of breaking that vicious circle, because huge amounts of money are being spent by taxpayers and by HMRC, and, in the end, nobody benefits.