§ 'Within 12 months of the passing of this Act the Chancellor of the Exchequer shall publish in a White Paper his assessment of the scale and nature of tax avoidance and evasion and his proposals to cleat with these problems.'.—[Mr. Robert Sheldon.]
§ Brought up, and read the First time.
Mr. Deputy Speaker
With this it will be convenient to discuss the following amendments:
No. 205, in clause 31, page 19, line 36, at end insert'except where the payee becomes resident and ordinarily resident in either the Channel Islands or the Isle of Man during the same year of assessment as the payment is made, the sum shall remain £10,000'.No. 201, in clause 69, page 62, line 11, at end insert'except in so far as subsection (2) below applies'.No. 202, in clause 69, page 62, line 14, at end insert'except in so far as the said sections may still operate to require every employer to make a return and deliver it to the inspector, if that employer carries on a trade or business, either itself or by one or more subsidiary or associated companies, where its activities in the Isle of Man or Channel Isles attributes at least 10 per cent. of its gross profit or turnover'.No. 203, in clause 81, page 72, line 22, at end insert'such particulars shall includeNo. 166, in clause 91, page 80, line 36, at end insert
- (a) details of periods of residence of trustees and beneficiaries within the Isle of Man or the Channel Islands during the lifetime of that trust, and
- (b) details of any settled property which is located in these Islands.''and this paragraph shall not apply to any assessments made for any year, where the transferor ceases to be domiciled in the United Kingdom by virtue of becoming domiciled in the Channel Islands or the Isle of Man.'.
§ Mr. Sheldon
We have tabled the new clause because we are concerned about the difference in attitude between the present Government and the Labour Government. A number of cases have highlighted the differences between the two sides of the House. We thought it right to draw attention to this essential distinction in our attitudes by tabling the new clause.
The matter does not start with the coming to office of the present Government. It stems from a previous period when, as a result of a number of avoidance devices, we sought to reach all-party agreement on a number of these matters. Since both sides of the House have a common concern about the necessity for raising revenue and for trying to show ourselves as being fair to all taxpayers whatever their position and income and whatever the amount of tax that they pay, one might have expected general agreement—on certain aspects, at any rate—concerning the increasingly important aspects of tax avoidance and evasion.
What brought this matter to our immediate concern stems very largely from the Vestey v. Commissioners of Inland Revenue case in 1979. Although that took place then, we knew much more about it as a result of The Sunday Times investigation in October 1980. As a result 1068 of that newspaper's deep examination of a number of aspects of the matter, it was shown that over a period of 60 years the Vestey company had been able to avoid paying tens of millions of pounds in income tax.
That matter may not have brought about a division between the two sides of the House. What lent particular colour and interest to our different approaches was the response of Lord Thorneycroft, the chairman of the Conservative Party, when he said:I would not criticise the Vestey family. Good luck to anybody who can make a success of business.I do not think that that was the sort of commendation that anyone engaged in tax avoidance on that scale ought to have received. The matter should have received, if not disapproval, at least outright condemnation. It was the failure to condemn that sort of approach which we saw upstairs in Committee. These were not matters of morality—to quote approximately the words of the Minister of State. That is what has caused us to table the new clause.
We know the results of the activities of the 'Vestey family, from their purchase of a peerage from Lloyd George in 1922—I believe that about £20,000 was paid for the peerage—to the creation of these offshore trusts. This is only one example of a number of cases that need to be examined if we are to achieve what we seek—fairness and reasonable comparison between the burden of taxation on the well-to-do and the burden on those who have little choice in the matter.
I referred earlier to the problems that faced the Labour Party when in Government, following the Rossminster case, when hundreds of millions of pounds of tax was being avoided by means of various devices. The burden of taxation on some people was avoided completely; it was unacceptable to see hundreds of millions of pounds flowing through the hands of the Revenue. There was no question but that, in order to maintain the dignity and the rightness of the taxation system, some action had to be taken, even to the extent of backdating the action by the Inland Revenue to the date of the use of the device. Some of these matters were discussed by the Labour Government with the then Opposition. We sought to obtain agreement about how these matters should be handled. It would have been much to the advantage of the House and of the Administration if we had been able to reach some agreement for acting in a uniform way. Unfortunately, that was not possible. I hope that those discussions might be reopened.
Undoubtedly schedule E taxpayers feel at an increasing disadvantage compared with those fortunate enough to be on schedule D whose expenses are allowable in many cases. Those on schedule D also have the ability to pay in depreciated pounds at a time of inflation many months later and the ability to negotiate certain assessments of their profits. This compares with the schedule E taxpayer whose tax is removed from him before his pay is received.
The Government proposed to end tax evasion by the simple method of reducing the burden of taxation. That proposal did not get far. They did not reduce taxation very much. Even though there was a reduction, one would need to be an acute observer to detect any difference in the level of tax morality and the decline of evasion. That is not to be seen. Those are two fundamental aspects of the problem of evasion and avoidance. It is right that the Opposition should now ask for a fresh examination by the Government 1069 who got both these matters wrong. They failed to assess the importance of avoidance and took too rosy a view of the simplicities of ending evasion.
§ Mr. Sheldon
I am approaching the end of my remarks. The hon. Gentleman may care to make his own speech. We have therefore tabled this new clause, which should form the basis of a useful debate.
§ Mr. Richard Wainwright
I am much obliged to the Labour segment of the Opposition for giving hon. Members the opportunity to discuss this new clause. I am also obliged to the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), who had the grace to make clear that the Government of which he was a great ornament were equally at fault. The Vestey case has been going on through the lifetime of many Governments. The Government in which the right hon. Gentleman was Financial Secretary did not succeed in exposing or stopping the Vestey loophole.
Having paid those genuine compliments—
§ It being Ten o'clock, the debate stood adjourned.