And so to our belated PMQs coverage, belated owing to my having decided to have a little snooze instead staff shortages due to the continuing adverse weather conditions.
Cameron began by toning his recent braying performances down considerably, and used two fairly calm and measured questions about protectionism to set up a telling point about the “British jobs for British workers” slogan. He correctly pointed out that it “encourages protectionist sentiment” even while Brown lectures the world on the “evils of protectionism” and zeroed in on Brown’s inability to apologise for misjudgements, including this one. But he can never resist being shrill for long. His last question ended “…and will he make a promise not to do it again?”, which just makes him sound ridiculous. The snarky schoolboy is never far away.
Clegg also got in a sideways hit at British jobs for British workers, but basically used his questions to do a very neat job of tying together all the tax themes he has been plugging for the last year – big, permanent fair tax cuts, an end to tax evasion in the Lords, big corporations and on the earnings of fatcats (or High Net Worth Individuals, as they are known in the trade – as in “Have you got my HNWIs? I left them on the filing trolley.”)
Mr. Nick Clegg (Sheffield, Hallam) (LD): I add my expressions of sympathy and condolence to the family and friends of Corporal Danny Nield, who tragically lost his life serving this country and the people of Afghanistan in Helmand province. Week after week, I have been asking the Prime Minister why he is not getting tough on tax avoidance. Every time, he tells me that he is doing all that he can. This week, newspapers have confirmed that big companies are using loopholes to get out of paying £14 billion in corporation tax alone. Instead of going on about British jobs for British workers, is it not time that he went on about British taxes for British companies?
The Prime Minister: This needs not only the efforts that we are making to clamp down on tax avoidance and tax evasion, but an international agreement. The right hon. Gentleman may be aware that there is a case in America at the moment in relation to Swiss tax avoidance. Once it is resolved, I believe that it is possible to get an international agreement for the exchange of information about tax cases. That would be the way to move forward our proposals for the exchange of information on tax and clamping down on tax evaders.
Clegg used his second question more effectively than he usually does, by taking Brown’s sympathetic first response and using it against him – Brown is in denial, Clegg said, because he created the impossibly complex system which allows billions of pounds worth of perfectly legal evasion avoidance to go on.
Mr. Clegg: The Prime Minister is living in denial. He created a system that lets big companies run rings round the Treasury, lets peers in the other place not pay their full taxes in this country and allows City bosses to pay less in tax on their capital gains than their cleaners pay on their wages. He is losing this country billions of pounds, which could be used to give big permanent tax cuts to ordinary families. Why should anyone trust him when he makes one rule for the fat cats and another for everyone else?
The Prime Minister: I remember that the chief donor to the Liberal party got into real trouble because he was a tax evader, and the Liberals never returned the money. Perhaps it is the leader of the Liberal party who is in denial at the moment.
We do everything we can, and will continue to do so, Budget after Budget, to remove the possibility of tax avoidance and tax evasion. In the end, it will need what the right hon. Gentleman should support—an international agreement. In the light of the Swiss case in the United States of America, I hope that we can make big progress on that, and I hope that the hon. Gentleman will support it.
If I may be permitted a rant, Clegg is absolutely right to refer to the system as the problem. The kind of inflexible control freakery that makes tax credits a nightmare for the genuine applicant and a breeze for the abuser is present, in one form or another, throughout the system. Brown’s inclination – proudly proclaimed here - to define ever more precise circumstances in which this or that allowance or relief may be claimed does not, as he thinks, close the loopholes ever tighter. It just changes the behaviour of the evader (often by creating another unforseen loophole).
Whatever Brown comes up with, there will be a get-round. There’s always a get-round. In the great battle of Gordon Brown versus an entire profession stuffed with very intelligent and highly paid tax consultants, who’d back the clunking brain? It’s not necessarily right or fair, but that’s the way it is. Urgent streamlining needs to take place if our tax system isn’t going to become an international joke within a decade.
Clegg could have improved his round-up still further, I suggest, by referring to Jack Straw’s recent amendment to the Constitutional Reform Bill which would ”make all peers be fully resident in the UK and pay full British tax”. Hey, sounds familiar, where have I heard that before? Oh, I know! Clegg asked the Prime Minister at last week’s PMQs to back a Lib Dem private member’s bill with the identical purpose. Brown dithered and declined to state open support and exactly four days later his government announces that they’re going to do it anyway. Well, blow me.
Clegg could also, as per, have refrained from the ghastly “ordinary families” tag. STOP IT! We are liberals! We’re All Individuals!
Incidentally, I did wonder last week why Brown didn’t flourish Michael Brown at Clegg in response to his tax evasion related question. But our unelected, unelectable Prime Minister is not good at thinking on his feet; his work experience bod must have pointed out since.
The development of an international consensus on sharing of individuals’ tax records across governments is something I am watching with interest (no, really). It strikes me that this is a legitimate reason for some form of data sharing - but it must not be allowed to turn into an argument in favour of the illegitimate reasons, and certainly not an argument in favour of a universally accessible data network. We have enough trouble controlling the information-hungry proclivities of our own abusive public servants, without taking on the rest of the world’s as well.
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10 Comments
“We’re All Individuals!”
I know what you’re trying to say, but it does sound a bit impersonal (and I have quite a few friends who are absolutely inseparable from their partners).
Hows about saying ‘people’? As in: we’re all people, ordinary people.
Or ‘human’? As in: we’re all human… oh yeah, well we try, so they might too!
“Brown is in denial, Clegg said, because he created the impossibly complex system which allows billions of pounds worth of perfectly legal evasion to go on.”
“Urgent streamlining needs to take place if our tax system isn’t going to become an international joke within a decade.”
Now I’m not going to suggest that Brown is whiter than white on this. But Brown didn’t invent the armies of clever tax lawyers who have been avoiding tax for their rich clients virtually since records began. And we Lib Dems haven’t invented a magic bullet that will suddently kill them all off and bring in oodles of tax boodle. The poachers are often well ahead of the gamekeepers. They always have been, and they probably always will be.
The super-rich have the financial clout to get things the way they want them. I am not happy that things are that way. But pretending that they are not does not improve matters.
If we really want to make a big thing about our expertise in closing tax loopholes, let’s hire some good tax lawyers and ask them what, if anything, is actually achievable. It is not just a simple question of “urgent streamlining”. That’s a glib assumption that you can snap your fingers at an awkward problem and it will go away. A simpler tax system can easily just have more glaring loopholes in it for the clever lawyers to exploit.
Let’s not show our ignorance by making simple errors. There is no such thing as “perfectly legal evasion”. “Evasion” refers to breaking the law. “Avoidance” is the word that refers to paying less tax while staying within the law.
David Allen wrote:
Yes, but he did preside over a massive increase in complexity in the tax system, an increase which can only work in the favour of those with the most resources at their disposal. Honest tax avoidance done by individuals and businesses simply by following the rules and keeping their records properly is an essentially “equal opportunity” activity; the local corner shop can do it just as easily as Tesco can. The complexity of the law now means that only those who can afford large legal teams can possibly gain the maximum benefit from the tax system. There’s a bigger question of fairness at play than simply the quantity of loopholes, there’s also the question of who has the resources to apply them.
Furthermore, the complexity does add to the difficulty involved in identifying unintended loopholes. There may always have been clever accountants, but there are more than ever now and their services are more useful than ever. You’re right to say that a simpler system could be easier to abuse, but the potential for abuse would also be dramatically easier to identify and to explain to the public at large and to Parliament, making tackling the problem much more feasible. At present, questionable tax avoidance strategies are protected by a kind of “security through obscurity” which makes figuring out what’s going on very difficult.
I’m not sure what this is intended to mean. Are you saying that there’s no point in trying to close loopholes which are exploited by powerful individuals and companies, because they will instigate some kind of conspiracy against anyone who tries? Isn’t that half the point of trying?
David, I used to be one of those “clever lawyers” (they’re not lawyers). I do have some basis for what I’m advocating here. I didn’t go into detail about what i meant by “streamlining”, but am of course happy to do so.
I deliberately did not use the word “simple” or “simplify”, as you seem to attribute to me. It’s a misnomer, and Clegg and Cable have frequently embarrassed me in the past by using it. The point is not to have a “simpler” tax system, in the sense of fewer yards of legislation or any of the other ridiculous measures that are frequently touted around, by politicians on all sides.
The point is to have a tax system with fewer special provisions for special cases. Special provisions can be abused, and they can be used for purposes for which they were not originally intended. And it has been the unerring tendency of this government to introduce more exceptions, make rules for meeting them more complicated and thus open up a multiplication of possibilities for the “clever lawyers” to do their work. At the moment, the Lib Dem tax plan does seek to remove some of these complications, and I for one would like to see others added to the list.
“Brown didn’t invent the armies of clever tax lawyers who have been avoiding tax for their rich clients virtually since records began”
Yes? That’s exactly my point! We’re never going to get rid of the poachers, so the best any government can do is make tax systems so clear and, within reason, sans exceptions that they do not admit of re-interpretation. In particular, the incidence of special reliefs and allowances must be reduced so that there is less opportunity for people with tax advisers to use them in ways the drafters didn’t intend.
Re: “evasion” for “avoidance”, you’re quite right, that was a simple mispeak, now corrected.
“Let’s not show our ignorance by making simple errors.”
And let’s not take cheap shots. I hope at least that I have been able to satisfy you with respect to my “ignorance”.
Rob Knight,
You make some fair points. I certainly do not think that we should let Gordon off the hook, or that we should stop trying to close loopholes. However, while Gordon and his civil servants may have made technical mistakes, I suspect he is largely doing his mediocre best to make rich people and corporations pay up. After all, his government is desperate for the money.
So it isn’t entirely unreasonable for us to score a few points off Gordon over tax avoidance, but, it’s a question of balance. What I really object to is what I call “crock of gold” politics.
A “crock of gold” politician tells the voters that he (she) can give them something for nothing. He can spend lots of government money on all sorts of new goodies, and yet he can also give away big permanent tax cuts. Then someone asks him how on earth he will balance his budget.
At that point, he has to discover a crock of gold at the end of the rainbow. One such crock of gold, which the Tories have been chasing for decades, is the magical ability to cut out all wasteful expenditure. Another such crock, in which we now appear to be showing interest, is the magical ability to win the game against the tax avoidance specialists who have been running rings around the Revenue up till now.
It is, of course, vital that we do keep trying to cut waste and stop tax avoidance. You make some interesting points about those needs. My point is a different one. We should not kid ourselves that we will have a miraculous level of success. To do that is to be dishonest with the electorate. And these days, they can tell.
Congratulations Alix on having made this afternoon’s Politics Home Web headlines.
I havn’t seen you there before so it might even be the first time you have had this recognition; much better than being in Dale’s Daily Dozen, or waiting for eventual recognition by Stephen’s golden dozen.
I don’t know who runs PH but I find it a compulsory morning read. All the politics from all the media wrapped up on one site. And even the Parliamentary business of the day, which has always eluded me before!
Ooh, hadn’t noticed that, thanks. Lots of visitors from it as well.
Clegg is right to raise tax haven issues in the Lords.
One useful thing he could do is to publish the names of Lib Dem Peers who now or in the past have held deirectorships of companies based in tax havens or used such tax havens for personal tax purposes or have been paid to lobby for such tax havens.
Following extract from this week’s Financial Times may also be useful for Clegg’s campaign to clean up the Lords:
Financial Times February 2009 by Jim Pickard
“A flurry of Lords have amended the register of interests in the last two weeks.
This Tuesday saw
1] Lord Clement-Jones, treasurer of the Liberal Democrats (and partner at law firm DLA Piper) add US defence group Raytheon to his list.
His “parliamentary lobbying” now includes:
The member acts personally for TransMedics Inc, a medical technology manufacturer
The member acts personally for Eli Lilly and Company, the pharmaceutical manufacturer
The member acts personally for University of Cambridge Local Examination Syndicate
The member acts personally for Raytheon Company a defence and homeland security technology company (3 February 2009)
I called his mobile to ask whether Raytheon was perhaps a new client but the peer hasn’t replied yet.
UPDATE: Clement-Jones tells me that he has only just signed up Raytheon – which is already a client of DLA Piper in Washington.”
Alix,
OK, you know more about this subject than you let on. Saying “evasion” where you meant “avoidance” is a bit like a sports commentator saying Man United ought to bring back Mourinho, and then expecting people to trust what he/she says…. Never mind.
Well my own level of knowledge is modest, and it mainly comes second-hand from my old dad. He was a taxman. The frequent comment by politicians of all parties that the Revenue should make tax simpler was guaranteed to drive him mad.
What always happens – according to Dad – is:
(1). Government asks Revenue to draft simple, streamlined new tax law.
(2). Revenue produces short, simple, streamlined draft tax Bill.
(3). Parliament debates Bill.
(4). Hosts of lobbyists descend, demanding exemptions, special case treatments, the deliberate creation of loopholes, reliefs for the deserving, reliefs for the undeserving, etc.
(5). MPs keen to show they are doing something press all the amendments.
(6). Government concedes a lot of them, often out of weariness, otherwise the Bill would never get through at all. In any case, the complexity often does make the tax fairer – or at any rate, it shuts up some of the awkward people who would otherwise carry on yelling about its unfairness and making trouble.
(7). Act reaches the statute books – far more complex, far longer, far easier to avoid tax, than the original Revenue draft.
(8). Politician blames taxman for what politician has done.
Would a Lib Dem government actually be very different, on this subject, from all those who have made the same promises before?
“Would a Lib Dem government actually be very different, on this subject, from all those who have made the same promises before?”
No,you’re right, we wouldn’t lets all pack up our bags and go home, after all, what’s the point?