Chloe Smith
MP for Norwich North
May
31

Queen’s Speech 2016: No haven for tax evasion

Author: Chloe Smith, Updated: 31 May 2016 12:46

A successful economy requires a competitive tax system. That means taxes which are low, which are fair, and, crucially, which are not open to abuse.

 

As part of this year’s Queen’s speech, it was announced that the Government intends to introduce legislation to tackle corruption, money laundering and tax avoidance. The aim is to capitalise on the success of the recent anti-corruption summit, at which countries from across globe agreed to work together to expose corruption, punish the perpetrators and drive out the toxic culture which corruption creates.

 

I welcome this move, having previously spoken on behalf of constituents against tax dodging and the damage it does to our economy, our public services, and our society.

 

Tax evasion is illegal and obviously intolerable. Aggressive tax planning, in which tax is avoided by exploiting loopholes which the Treasury never intended, is also clearly unacceptable.

 

As we move forward, it is perhaps useful to reflect on how far we have already come in this effort.

 

Significant progress has been made to tackle offshore tax avoidance by multinational companies, especially through working with international partners to modernise international tax rules. Britain is leading the way in this area. I am pleased that, following developments in the level of tax transparency in the Crown Dependencies and Overseas Territories it is much harder to escape paying taxes by hiding money overseas.

 

Other action in Britain, which I've proudly voted for in Parliament, includes the diverted profits tax which means Google and other companies will pay more tax in future. In fact they will pay more tax than they ever paid under Labour, when the tax rate for Google was 0 per cent. The diverted profits tax works by preventing companies from creating tax advantages by using transactions or entities which lack economic substance. The goal is to counteract contrived arrangements used by large groups (typically multinational enterprises) which erode the UK tax base.

 

The Government has repeatedly improved the tax laws to crack down on foul play, thereby securing an extra £100 billion in the last Parliament. Yield from compliance activity - dealing with aggressive tax avoidance, evasion and fraud - rose to a record £26.6 billion in 2014/15, including £7.3 billion from the 2,000 largest and most complex businesses in the UK.

 

In short, I believe we need low taxes to support business in Britain, but these low taxes must be paid.  

 

When we came to power in 2010 banks did not pay tax on all their profits, investment companies could cut their tax bill by flipping the currency their accounts were in, companies could fiddle accounting rules to make losses appear out of thin air. All of this was allowed under Labour but is being stopped by this Government.