I will try to be relatively brief, but, as the Minister has said, there is an awful lot to get through. I know that many Members wish to speak—indeed today, we have a profligacy of right hon. Members with us, particularly on the Opposition Benches, which is very good—so, perforce, I will have to be brief on various issues.
Labour does not oppose clause 144. On clause 145, which is to do with the general anti-abuse rule, I would like some assurance from the Minister that there are enough staff to deal with this work. I realise that the Government have gone into reverse gear on this, which I welcome, and the number of full-time equivalents has gone up from 57,000 to 60,000 this calendar year. That is a good step, but HMRC was significantly underperforming because it was very understaffed, and clause 145 proposes an additional amount of work for staff to do, so I should like some reassurance on that.
Clause 146 proposes penalties for the general anti-abuse rule. The Chartered Institute of Taxation, which has been extremely helpful to all Members, especially those on the Opposition Front Bench, is concerned that someone might be punished in a rather draconian manner for an innocent error of judgment. However, when my excellent researcher, Imogen Watson, looked at the case to which CIOT referred, she found that it was one to do with customs and excise rather than corporation tax and income tax. Perhaps the Minister can provide some clarification on that.
Amendment 4 on clause 146, which is tabled by me and my hon. and right hon. Friends, deals with raising the penalty from 60% to 100%. I heard what the Minister said about that, but I am concerned that the penalties would not be sufficient to change behaviour and encourage socially acceptable law compliant behaviour, which is what we all want to see.
Clause 147 deals with serial tax avoidance. The Chartered Institute of Taxation has expressed concern, and I understand its point, that this clause might introduce what would be a double penalty for an individual. Generally, we try to avoid double penalties for wrongdoing. Perhaps the Minister could have another think about the clause, or clarify for the Committee today that the CIOT has misunderstood things and there is no such double penalty being introduced. Could the Minister give us an indication—I know that these things are difficult—of how many non-taxpayers will mend their ways as a result of this measure and become taxpayers? Again, there is an issue of funding for HMRC.
Clause 148, which relates to the promoters of tax avoidance schemes, is supported by the Labour Front-Bench team. Although we support clause 149, which deals
with special measures and so on, we have put forward amendments 5 to 18 on it—the Minister referred to them earlier. Those amendments deal with increasing the penalty to £25,000 from £7,500 and for holding a director or directors “jointly and severally liable”. Rather strangely, the Minister said that the Government were in the business of “encouraging behavioural change”. Well, so are we. Having higher penalties could encourage behavioural change, by which I mean somebody not indulging in bad behaviour, and filing their reports and so on. That is why we came up with the idea of joint and several liability rather than leaving it to one person. That means that all directors would be aware of what was going on. Furthermore, if the penalties were levied, they would not be reimbursable as is too often the case. Too often, companies simply reimburse their staff when the staff have engaged in non-criminal wrongdoing. That is not an incentive for them to avoid wrongdoing in future—quite the reverse if anything.
With clause 149 comes amendment 1. I will be brief on that amendment, because my right hon. Friend the Member for Don Valley (Caroline Flint) will no doubt be speaking to it. It is an excellent amendment, which is fully supported by the Labour Front-Bench team. I will say a couple of things very briefly in response to what the Minister said on it. He said that the amendment is technically flawed. That may be the case, but this is the first of almost 200 amendments. If the Government supported it, they could have corrected any technical flaws they saw in it. I also think that they are being a bit timid here, because I do not see how the provisions under amendment 1 will lead to disadvantage to UK headquartered companies or to reputational damage—quite the reverse. Whether the Minister likes it or not, the reputation of Google was adversely affected in the United Kingdom because its tax deal with the UK authorities was not transparent and because people thought that Google was getting away with it. If there had been more transparency, Google’s reputation might not have been adversely affected.
Similarly, provisions in amendment 1 could lead not to reputational damage for UK headquartered companies, but reputational enhancement. I have to say to the Minister—I cannot resist it because he is such a good Minister—that, in our society, talking the talk is seen as hot air, but Gauking the Gauke is seen as being polite and helpful. May I urge him to walk the walk and support amendment 1? If it needs tidying up, he should do it and sort out the technicalities.
Let me talk now about clause 150 and schedule 20—I know that I am going at a bit of a gallop, but there are others who wish to speak. I heard what the Minister said about amendments 19 and 20, which are putative amendments to schedule 20. I defer to his superior knowledge, as this is a very technical area, and I am not an accountant. I think that I understood him to say that what was proposed in amendment 19 was already covered in schedule 20. In relation to amendment 20, he referred to “blind-eye knowledge”, which is a new one on me. I, like him, am a lawyer, and it seems that schedule 20 is introducing civil penalties and not criminal ones, so I accept what he says and will not be pursuing amendments 19 and 20.
Labour supports clause 151, which is to do with penalties in connection with offshore matters and offshore transfers. Clause 152 relates to offshore tax errors and publishing details of deliberate tax defaulters. Helpfully, the explanatory notes say that the clause will amend the Finance Act 2009 to allow HMRC
“the power to publish the details of an individual who controls a body corporate or a partnership”—
when it has been—
“charged a penalty for a deliberate failure to notify HMRC of a tax charge or deliberate inaccuracy in a return, and”—
when that individual—
“would have obtained a tax advantage”—
from it—
“had it not been corrected.”
This must involve an offshore matter or transfer.
1.30 pm
That would mean HMRC publishing details of naughty taxpayers or naughty non-taxpayers. In that connection, may I urge the Government again to think about when HMRC, which is under the supervision if not the direct control of the Government and where the Government have a great say on overarching policy matters, to reconsider the question of taxpayer confidentiality? When deals are being done with large companies, as opposed to individuals, those deals could, as part of HMRC’s bargaining, include a waiver of confidentiality on the deal. So, for example, in the notorious Google tax deal, the Chancellor of the Exchequer—understandably —repeatedly said, “I can’t tell you how we got to the deal. That is confidential.” Yes, that was true, but unfortunately that was because HMRC, with the Chancellor of the Exchequer, failed to insert in that agreement with Google a waiver of confidentiality from the taxpayer. If the taxpayer waives their confidentiality, the Government can publish it all. That should be in such settlements, and should have been in the appalling settlement with Vodafone that was done for billions of pounds—I think under a Labour Government, shamefully.
New clause 4, tabled by me and my hon. Friends, relates to clause 152 and requires a report on the workings of the general anti-abuse rule. I am sorry that the Government are apparently not going to accept it. In connection with that, I understand what the Government have said about new clauses 5, 6 and 7 and about the timeframes in them being meaningless because the reports would have to be done before the measures on which they were reporting had been implemented. I quite understand that. I did not understand the Minister to say that about new clause 4, but if he did, he could perhaps clarify when summing up that it is a deadline issue. If it is not a deadline issue, as it was with new clauses 5, 6 and 7, perhaps he could confirm that the Government will support new clause 4, as they should.
Clause 153 is quite interesting for those of us on the Opposition Benches who like to try to think widely on tax measures, because it is a small step towards a wealth tax. That might not be the Government’s intention, and I am not saying that it is Labour’s proposal on taxes. We are looking at things very broadly, but asset-based penalties for offshore inaccuracies and failures are introduced by clause 153 and schedule 22. In that connection, I want to raise an issue that was raised with me by the Law Society of England and Wales. I declare
an interest in that I am a member in good standing of that organisation—as is the Minister, I suspect. The Minister might have a ready reply for the issue the society raised: as we are talking about asset-based penalties, how does one value the asset? What is the mechanism for its valuation and what happens for those assets that fluctuate in value?
Labour supports clause 154, on offences relating to offshore income, assets and activities. I think that the Minister has already responded on the question of new clause 7, which, in a sense, would be coupled with the clause. He pointed out that the deadlines would not marry up, with the report being done before measures came into effect, and I quite understand that. I apologise to the Committee for not spotting it.
That brings me on to new clause 9, tabled by my right hon. Friend the Member for Barking (Dame Margaret Hodge), which is supported by those on the Labour Front Bench. I will let my right hon. Friend explain its necessity and desirability to the House if she catches the eye of the Chair.