Trying to sort out tax avoidance fact from fiction in David Cameron’s answers to Prime Minister’s Questions is like wading through treacle.
One would have expected a little more willingness to show honesty after nearly two weeks of squirming, but ‘Dodgy Dave’ came out fighting today. What a shame his blows had so little impact.
Let’s see if we can make sense of any of it.
Kicking off, Labour leader Jeremy Corbyn said the European Commission has announced new proposals on country-by-country tax reporting, so that companies must declare where they make their profits in the European Union and in blacklisted tax havens.
Conservative MEPs voted against the proposal for country-by-country reporting and against the blacklisting. Could the Prime Minister now assure us that Conservative MEPs will support the new proposal?
Cameron said he welcomed the proposal, which was put forward by a commissioner appointed by the Conservative Government – Jonathan Hill. He said the proposal was based on the Conservative Government’s work, and took the opportunity to claim that this was happening faster than under any previous government.
Why is it happening under the Conservative Government and not under any previous one? Is it perhaps because it is more of a priority, due to public outrage at the tax antics of the obscenely rich, following a hugely damaging worldwide economic crisis?
And if the proposals were put forward by the Conservative Government, then – as Mr Corbyn asked – why did Conservative MEPs vote against them? Was it because – as Sir Alan Duncan suggested in the Commons earlier this week – corporation tax and other taxes are only for “low achievers”?
And, with the tax gap estimated by HM Revenue and Customs at £34 billion, why was Cameron cutting HMRC staff by 20 per cent?
Cameron responded with an attack on Mr Corbyn’s own tax return as “late”, “chaotic”, “inaccurate” and “uncosted”. What a courageous strategy!
… But only if, by courageous, one means disastrous. Yes, there are mistakes on the Corbyn tax return – but they have all been identified very quickly and are rectifiable. Now consider David Cameron’s tax affairs. It is impossible to understand them, simply by looking at the edited highlights provided by the prime minister. The information we have been able to drag out of him over the last few days shows that it is not what is on Cameron’s return that is at issue, but rather what he has left off it!
It also gave Jeremy Corbyn the chance to land a solid blow against Cameron. Referring to the prime minister, he said: “I actually paid more tax than some companies owned by people he might know quite well.”
On the tax gap, Cameron said his government closed off loopholes equivalent to £12 billion in the last Parliament – and intended to close off loopholes equivalent to £16 billion in this.
Can he prove it? How can we tell that this was – or will be – achieved?
Rather than answering Mr Corbyn’s question about HMRC staff, Cameron said he had put more than £1 billion into the organisation, to increase its capability to collect tax.
Mr Corbyn responded thus: “He is not cutting tax abuse; he is cutting down on tax collectors… Last month, the Office for Budget Responsibility reported that HMRC does not have the necessary resources to tackle offshore tax disclosures. The Government are committed to taking £400 million out of HMRC’s budget by 2020. Will he now commit to reversing that cut so that we can collect the tax that will help to pay for the services?”
For clarity: 11,000 full-time staff positions were lost at HMRC between 2010 and November 2015, when plans were announced to close 137 offices, thereby laying off thousands more.
HMRC itself seems proud of the staff cuts, and accompanying funding cuts. It’s 2014-16 business plan states:
We have a strong track record of delivering savings. Between 2011 to 2012 and 2015 to 2016 we will have reduced our workforce by 22% and our total departmental expenditure by £1.2 billion a year (before reinvestment in compliance and digital), while increasing compliance revenues by more than £11 billion a year to £26.3 billion in 2015 to 2016.
We will continue to become leaner and more streamlined by:
•reducing our full-time equivalent employees (FTE) to around 52,000 by 2015 to 2016, from around 61,000 in April 2014, based on our Spending Review plans
•reducing the size of our estate by 60,000 metres squared in 2014 to 2015 and 35,000 metres squared in 2015 to 2016
Here’s the graph that illustrates the funding cut:
Cameron’s response fell far short of the mark: “At the summer Budget in 2015 we gave an extra £800 million to HMRC to fund additional work to tackle tax evasion and non-compliance between now and 2021.”
Leaving it £400 million short of the funding it had in 2010-11, and £2.1 billion short of the funding it would have received at 2005 levels, adjusted for inflation.
“That will enable HMRC to recover a cumulative £7.2 billion in tax over the next five years.”
How much could be recovered if funding stood at £5.6 billion, and how do we know £7.2 billion will be recovered, as Cameron claims?
“We have already brought in more than £2 billion from offshore tax evaders since 2010.”
So the Conservative Government will recover more money, using fewer resources? Pull the other one. As Mr Corbyn pointed out, the Red Book states that HMRC spending will fall to £2.9 billion by 2020.
He seemed to tire of the subject at this point, but returned to it later, with the following claim about the number of people in full-time equivalent posts in HMRC: “The numbers went from 25,000 in 2010 to 26,798 in 2015. It is not how much money you spend on an organisation; it is how many people you can actually have out there collecting the taxes and making sure the forms are properly filled in.”
This is bizarre, because it bears no relationship to what HMRC itself said in its business plan:
According to the plan, these numbers are reduced to 52,000 by 2016.
It allowed Mr Corbyn to say: “The number of people out there collecting taxes is important, so why has he laid off so many staff at HMRC, who therefore cannot collect those taxes?”
No answer was forthcoming.
Cameron moved on to a subject on which he could make an even bigger fool of himself – the register of beneficial ownership of companies, that he seemed to think would be made public by Crown dependencies such as Jersey and the Cayman Islands.
“We got the overseas territories and Crown dependencies round the table and we said, ‘You’ve got to have registers of ownership, you’ve got to collaborate with the UK Government and you’ve got to ensure that people do not hide their taxes.’ And that is what is happening.
Except it isn’t.
Mr Corbyn responded: “Only two days ago the Prime Minister said that he had agreed that [the Crown dependencies] will provide UK law enforcement and tax agencies with full access to information on the beneficial ownership of companies. There seems to be some confusion here, because the Chief Minister of Jersey said, “This is in response to a need for information without delay where terrorist activities are involved”.
“Obviously we welcome the Prime Minister’s commitment to fighting terrorism, but are Jersey and all the other dependencies actually going to provide beneficial ownership information or not?”
Cameron parried: “The short answer to that is, yes they are, and that is what is such a big breakthrough.”
No. They’re not. Mr Corbyn later referred to Cayman Islands premier Alden McLaughlin, who said the information “certainly will not be available publicly or available directly by any UK or non-Cayman Islands agency”. Registers have been created but are only available to law enforcement agencies, not the general public – and Cameron’s own minister for the overseas territories, James Duddridge, has admitted that the UK isn’t making any more demands of them.
So when David Cameron said: “What the overseas territories and Crown dependencies are doing is making sure that we have full access to registers of beneficial ownership to make sure that people are not evading or avoiding their taxes,” his words were not true.
Cameron also said: “We are publishing a register of beneficial ownership. That will happen in June.” This is accurate – but is not new information. The decision to publish a register was announced in November last year.
Mr Corbyn wanted clarity: “Will he now make it clear that the beneficial ownership register will be an absolutely public document and transparent, for all to see who really owns these companies and whether they are paying their taxes?”
Cameron obliged: “For the United Kingdom, we have taken the unprecedented step… of an open beneficial ownership register. The Crown dependencies and overseas territories have to give full access to the registers of beneficial ownership. We did not choose the option of forcing them to have a public register, because we believed that if that was the case… some of them might have walked away from this co-operation altogether.”
Mr Corbyn countered: “The only problem is that it is not a public register that he is offering us: he is offering us only a private register that some people can see.”
So Cameron repeated his claim: “In terms of the UK, it is an absolute first to have a register of beneficial ownership that is public. He keeps saying it is not public; the British one will be public.”
No: “This information will be accessible to domestic authorities without alerting companies and the Government is committed to making this register publicly accessible. The public register is expected to be operational in June 2016. The Government indicates that it will ensure that financial institutions and certain non-financial businesses and professions undertaking customer due diligence will be able to access the information held on this central register. It is not clear what this adds to the commitment to make the register publicly accessible, unless perhaps the Government intends such institutions also to be able to access the information without alerting the companies concerned.”
The Verdict: Where Cameron wasn’t completely wrong, he was inaccurate. Performances like this will only reinforce public distrust and encourage calls for his removal from office. He cannot be trusted.
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