It is a pleasure to follow the right hon. Member for Don Valley (Caroline Flint) and to support her amendment. I shall not repeat the arguments that she made so eloquently, but I shall make a few separate points.
Those of us who regard the UK as a great place to do business, and who want to attract international investment here and encourage our businesses to expand overseas and to export, recognise that we need a business climate which inspires confidence, where firms feel that they can compete fairly and that we have a respected financial system, tax system and market in which those operating here are seen to be behaving properly. Over the past few years we have found out from a series of leaks that large multinational companies have been misbehaving. Those companies are hauled through the press and parliamentary Committees, such as the Public Accounts Committee, on which I serve. That is not the right way to boost our business climate.
We need to move on from that and show the people of the UK and people around the world that companies that are based her and operate here follow the rules, and those that do not follow the rules will be caught and dealt with, and will be strongly encouraged, if not forced, to change their behaviour. That is the way to move the debate further. Running and hiding and waiting for others to do that will not help. It is we who have taken the lead, taken action publicly against those
companies and made them change their behaviour. For us to resile from that and say, “We’ve done our bit. Let someone else go first” will not work.
We are one of the main global financial centres. Many companies that come here to list on our stock market were not founded here and are not headquartered or based here. We need to set an example and say, “If you want to come and be based here, you need to follow the highest standards. We want you to behave ethically.” I have no problem with UK-based companies trading in low-tax jurisdictions. If they are trading there commercially, if they have assets there, if they have employees there, that is their right, but they should publish a report so we can see that what they are reporting is commensurate with their activities there, and that they are not simply hiding profit there that was not earned there. I welcome the increased transparency that the amendment would provide.
I do not believe the bleak competition warnings. It is not as though every small company would be required to provide such a report. The requirement would apply only to companies with turnover of more than €750 million. I would not like to guess what that is in sterling. I am sure it will gradually go up as the economy strengthens, now that we have left the EU. I would be surprised if many companies of that size have major trading activities in developed countries without having a subsidiary there which is making the sales. If those companies do have such a subsidiary, they will have to file statutory accounts in those territories. I suspect that in most regimes those will be public, so people will know the turnover of those big corporations in those regimes, and they will know what tax is due. Companies filing UK tax have to provide a segmental analysis that shows where they are operating in the world and breaks down turnover and profit. We are not creating a new set of disclosures that do not already exist; we are trying to enhance the ones that we have and make them work.
I checked some major multinational accounts this morning and found one segment that said, “UK, US and international”. That is of no use to us. The idea of segmental reporting in financial accounts was to provide some disclosure so that we knew who was operating where, how much they were making and what they were doing. I do not believe that for the vast majority of very large companies that are trading ethically and not trying to avoid tax the requirement will be a great hardship. Yes, it may put a little more in the public domain, but it will put that into one document where people can read and understand it, see it transparently and clearly, and get a full picture of what the company is doing.
Everyone will understand that there is no reason why a company based in the UK that happens to make a few sales in France but has no people or assets there should pay French corporation tax. Similarly, there is no reason why a French company selling into the UK would pay UK corporation tax. We can make that clear. What we want to know about is those companies that have a large turnover and very few assets and employees in a very low-tax jurisdiction, so that we can work out whether they are acting legally. Maybe they are.
Perhaps some guy sitting in Guernsey on his own happened to invent a great product and has been receiving royalties. That is fair enough. He is entitled to do that.
If he is based in Guernsey, that is rightly his income. I suspect that there are not many such cases, compared with the scale of business activity in those overseas jurisdictions. At least when such activity is transparent the businesses concerned will be able to explain it and defend themselves, or we will all know that those companies are misbehaving and we will be able to choose whether to buy from them or not. The amendment would help us to achieve that. As with all Back-Bench amendments, it is not perfect. The report should be provided in a company’s financial statement so that there is some assurance from the audit process that the data provided are accurate. I urge the Government to bring forward a Bill which would do that, so that the information would be provided in the right place.
It is not perfect for the reporting requirement to be in a tax policy statement that applies only to the UK and without any audit requirement. It may not provide assurance that all the disclosures are absolutely right and that no territories have been omitted or data combined in a way that we cannot understand. I suspect that there will be penalties for failing to publish the whole statement, but no scrutiny of what is published. Perhaps if the same information is provided to HMRC, there will be greater transparency. HMRC may notice that what is in the public domain is not quite the same as the information submitted to it. We could therefore make the proposal better.
It would probably be better if we tackled this issue EU-wide. I am perhaps the only person in the Chamber who thinks we should be making these laws ourselves, rather than having the EU make them for us—tax was always meant to be a member state competency—but if we want to wait a short period to have these things done in a consistent format across the whole of Europe, I would not mind if publication were in 2018 rather than 2017. However, we could at least have a clause that says that we will do these things from 2018 unless the EU has done something that applies here before then, in which case we could repeal that clause.
2 pm
However, that is not where we are. We have a choice between passing amendment 1 today or waiting and hoping that somewhere else will take the lead on something that we have been leading on. Our Government have rightly introduced a whole new tax to try to stop corporates abusing the global tax regime. I am not sure that a few disclosures are quite as displacing as a whole new tax was, so I am not sure why we are being a little more cautious in this situation.
However, the right way forward is for us to be united on this issue and for the Government to say, “On reflection, we will bring forward a clause on Report,” so that we can tackle this issue in the right way and not in a slightly forced way. That would be the best way forward, and I hope the Minister will agree when he responds to the debate. We could then show that we are all behind the policy I think the Government have. If we cannot do that, I will support amendment 1.