Low and No-Tax Jurisdictions

Motion to Take Note

12:37:00

Moved by

That this House takes note of the tax implications of corporations shifting profits to low and no-tax jurisdictions.

My Lords, I begin by welcoming the noble Baroness, Lady Coffey, to this House. I really look forward to hearing her maiden speech. It is a good time to talk about profit shifting, as the US is tearing up tax treaties and the OECD’s base erosion and profit shifting—BEPS—project has stalled. HMRC states that since 2010 some £500 billion of tax has not been collected. A methodological annexe issued by HMRC, dated 20 June 2024, states: “Some forms of base erosion and profit shifting (BEPS) are included in the tax gap where they represent tax loss that we can address under UK law. The tax gap does not include BEPS arrangements that cannot be addressed under UK law and that will be tackled multilaterally through the OECD”. Basically, HMRC does not really know how much profit is shifted out of the UK and what the related tax losses are. Multinational corporations are shifting annual profits of around $1.4 trillion into tax havens, causing Governments around the world to lose $348 billion a year in direct tax revenue. I am sure the Minister will be able to tell us how much the UK is losing. Over $329 billion of profit is shifted into the UK’s Crown dependencies and overseas territories by multinational corporations every year, causing a tax loss of $80 billion. This daylight robbery is facilitated by financial engineering and opacity from a rapacious tax abuse industry located in the UK and its global dependencies. The Criminal Finances Act 2017 was introduced to tackle corporate tax evasion but, to the best of my knowledge, to date no one has been charged or prosecuted under it. So how exactly are profits shifted? I have a couple of examples. Consider the case of BHS, which collapsed in 2016. I declare an interest as an adviser to the Work and Pensions Committee during its investigation into BHS. Lady Green, spouse of the chief executive, held 98% of its shares. In 2001, BHS sold some of its properties for £106 million to Carmen Properties Ltd, a company based in Jersey and under the sole control of Lady Green. The properties were then immediately leased back to BHS in England. Between 2002 and 2015, BHS paid £153 million in rent to the company in Jersey. These rents were tax-deductible expenses in the UK and reduced the tax liabilities of BHS. The rents booked in Jersey were not taxed because the profits were not made on the island. The profits of Carmen, the Jersey-based company, were then paid as dividends to Lady Green, who resided in Monaco, which levies no income tax at all. Through this related-party transaction, BHS was able to manufacture a tax-deductible expense and reduce its tax liability. Lady Green received dividends on which no tax was paid in the UK or anywhere else. This type of financial engineering is not uncommon and the resulting losses do not form part of HMRC’s tax gap numbers, which are grossly understated. Governments can easily check the leakage of tax revenues by deducting tax at source from dividends, interest and other payments to entities in low and zero tax-rated jurisdictions. If the recipient can show that he or she paid the tax on the transaction elsewhere then the tax withheld can be refunded, but successive Governments have made no effort to curb this sort of tax avoidance. My second example relates to the use of affiliates and subsidiaries in low or no-tax jurisdictions to shift profits. Starbucks, Microsoft, Google, Amazon, oil, gas and numerous other entities use complex corporate networks to shift profits. Apple’s profits are parked mostly in Jersey, where it really has no physical presence. Transnational corporations have huge opportunities for profit shifting and tax abuse. A microchip company has its product designed in country A, manufactured in B, tested in C and patented in D, and has its marketing rights located in E. Determining the cost, profits and allocation to each country is highly problematic. Companies adjust their import and export prices and shift profits, especially as around 60% of world trade is internal to companies. The OECD’s transfer pricing rules require the use of arm’s-length prices, but in the absence of active independent markets such prices are almost impossible to ascertain. The top 500 companies in the world control around 70% of world trade; 80% of global sales of coffee are attributed to just three multinational corporations; and two companies control 40% of the global commercial seed market. Around 10 companies dominate the global pharmaceutical industry, four dominate the agricultural commodities market and around 14 dominate global auto manufacturing. This gives them huge opportunities for profit shifting and tax abuse. I will illustrate this with an example relating to bananas. I am sure that all noble Lords have had bananas and have wondered where exactly most of the UK’s bananas come from. The UK’s bananas come from an island that does not grow any bananas and which no banana-laden ship has ever visited—that is, Jersey. Companies such as Chiquita, Dole, Fresh Del Monte, Fyffes and Geest control banana production in west Africa and Latin America, but all the paperwork is routed through Jersey. For bananas selling for £1 in a UK supermarket, 13p goes to the growing country, of which 10.5p is for the cost of production, 1.5p is for labour and 1p is profit. After that, the games begin: 8p goes to a purchasing network located in the Caymans, within the same group of companies; 8p goes to a Luxembourg subsidiary for providing financial services, including interest payments on intragroup loans; 4p goes to Ireland for the use of a brand name; 4p goes to the Isle of Man for providing insurance; 6p goes to Jersey for management services; and 17p goes to Bermuda for providing a distribution network, even though no ship ever visits there. By the time the bananas are unloaded in the UK, the 13p-worth of bananas magically has a cost of 60p and is sold in the supermarket for £1. The supermarket incurs costs in selling those bananas and will eventually declare a profit of 2p, which if taxed at the rate of 25% will yield half a penny for the Chancellor, out of the £1 that the customer has spent. So 47p of the profit made from UK customers is booked in low or no-tax jurisdictions and those profits are not taxed anywhere in the world. These numbers do not form part of HMRC’s tax gap calculation. Almost every multinational company is engaged in this type of profit shifting and tax abuse. I used to work for an oil company; another day I can maybe give the House examples of what the oil companies get up to. Profit shifting requires urgent attention. The Companies Act 2006 does not require company accounts to provide any information about profits shifted. Accounts are totally opaque. Can the Minister say what plans the Government have to give visibility to profit shifting? Some visibility can be provided by public country-by-country reporting, which would enable proper transparency on both the amount of taxes avoided by multinationals and how far the UK’s measures have been effective in tackling that. Section 122 of the Finance Act 2015 contained a requirement for multinationals operating in the UK to publish a public country-by-country report. But the legislation was never implemented and was subsequently repealed by the Finance (No. 2) Act 2023. The UK is now way behind other countries. The EU and Australia now require companies to make these disclosures through public country-by-country reporting. Can the Minister explain why the UK shuns tax transparency? The UK Government have signed up to the OECD global tax deal, requiring a 15% minimum effective tax rate on multinational corporate profits, but President Trump has withdrawn from that agreement and threatened sanctions against Governments which levy 15% minimum tax on US companies operating in their countries. There is a way forward in the UN framework convention on international tax co-operation, but, unfortunately, last November the UK Government voted against it. It would be helpful to know what their strategy is. Finally, it would be helpful if corporate tax returns are made publicly available, so that we can all see how they are shifting profits and what kind of taxes are being abused. That would empower the Public Accounts Committee to scrutinise those corporations and any sweetheart deals done by HMRC. I beg to move.

12:49:00

My Lords, it is a huge privilege to have been introduced to this House last week, thanks to the recommendation to His Majesty the King by the leader of the Opposition, the right honourable Kemi Badenoch. I want to thank everybody who has made me feel most welcome. That starts with Black Rod and her team of excellent doorkeepers, under the stewardship of Mr Ingram; to the security team who keep us safe; to the Library, who feed our minds; to the catering team, who feed us and keep us going; to the cleaners, who keep this space spotless and sparkling; to all the clerks, who have helped me navigate this familiar, yet new, territory; and indeed everyone who contributes to enable this extraordinary, hallowed atmosphere in which we operate and seek to do our level best in the important constitutional role that we undertake. I also want to thank my supporters who introduced me last week: first, the noble Baroness, Lady Stedman-Scott, whom I first met when I unexpectedly became Secretary of State for Work and Pensions. She was my absolute rock and I learned so much from her, as I am doing now. As for the noble Baroness, Lady Pidding, I first met her over 20 years ago and we have been friends ever since. She has been a constant source of encouragement to me. However, I would not be here at all if it were not for my family. It was particularly emotional when I was introduced last Tuesday, as it was precisely six months after my dear mother passed away. She loved Parliament and she loved politics. She loved coming to Westminster, particularly to the River Restaurant, where she would be called “M’Lady”—she loved that. She was a teacher, as was my father, who had passed away some years earlier. I held his Bible in my hand as I swore the oath. My sister was in the Gallery, and she genuinely saved my life seven years ago when, thanks to her tenacity with the NHS, I had an emergency operation for a brain abscess, which thankfully was successful. As a family, we were all involved at some point in the Conservative Party in Liverpool, where I grew up in Grassendale, leading to its inclusion in my longer title. My political awareness was triggered by Militant Labour’s running of my home city, when, yes, my parents, as teachers, were part of the thousands who received their redundancy notices. That was when I realised that politics—who ran the council or country—mattered. I certainly enjoyed my time as a Back-Bencher representing the people and businesses of Suffolk, and I reflect my love for Suffolk in my longer title with the town of Saxmundham, where I live. I should alert your Lordships that, when I left government, I became the Back-Bencher who spoke the most in the final six months of the last Parliament. I think it was the ability to speak for the first time on any topic that inspired me to pronounce on a variety of issues, recognising that I had been a Minister continuously for over nine years—two-thirds of my parliamentary career there. But I have that out of my system and I expect to be able to focus on some particular areas—but those will be of my choice in this House. Prime Ministers have made choices for me, on where I specialised and gained most experience and expertise, particularly in three departments—Defra, Health and Social Care, and Work and Pensions—where I had the privilege of being Secretary of State. I will endeavour, to the best of my ability, to really embrace the huge positivity of this House in its key role of scrutinising legislation and the Executive. I know government is hard. I actually want the Government to do well, for the sake of the great people of our great nation. While I am sure we will disagree on certain aspects of policy or how we can improve the performance of our public services, I am united in wanting a strong NHS, a strong economy and for our country to succeed. I have long admired the tone of this House, with keen and courteous scrutiny at its heart, somewhat in sharp contrast to the other place where, sadly, the focus has become the social media clip rather than the social discourse and debate we used to have. I hope that I have already accrued some credits in my apprenticeship for this place, by learning from all the Lords Ministers with whom I worked in government. There are several to name. However, I will save that for another day, but I can assure noble Lords that I recognise both how hard Lords Ministers work and the contribution to scrutiny made by this House, with its gentle peer pressure in trying to improve the legislation and performance of government for the greater good, even if, at times, it did not feel quite so gentle. I am conscious that beyond the Chamber there is a wider community of Parliament in which I seek to play to a role. I have already started attending APPG events on the ocean, nature, trees and energy, and I look forward to the annual tug-of-war for charity. I certainly hope to provide some balance—if not some ballast—to help the Baronesses defeat the Commons for the first time.

Hear, hear!

I know that I am making my maiden speech in this House perhaps much earlier than the norm. I could say it is because I am interested in the topic, as I worked as a finance director for a subsidiary of the multinational company Mars, Incorporated, so I am fully aware of the issue of corporate taxation and transfer pricing—more on that later. But I confess that the real reason for speaking today is that I am really keen to speak in Monday’s Moses Room debate on the statutory instrument about bins—yes, bins. Bins, potholes and pavements are the basics of local political life and, when they are not working well, people notice and get fed-up very quickly. However, I shall save my further remarks until next week. I turn now to today’s debate on multinationals and corporate taxation. I congratulate the noble Lord, Lord Sikka, on securing this debate. As a Professor of Accounting at the University of Sheffield, I know he has focused considerably on this issue. I bring my experience from business. I qualified as a chartered management accountant while working for Mars, Incorporated, and I certainly enjoyed the intellectual challenge of taxation. I think it wise at this point that I declare that I have a deferred pension with Mars, which is a multinational corporation. My curiosity about corporate taxation was triggered when I did a summer placement with Ernst & Young. I had the joy of spending a week with the VAT team just as they were in court helping their client to persuade the judiciary that, yes indeed, a Jaffa cake is a cake, not a biscuit. With that, their product would continue to be zero-rated for VAT and therefore cheaper to the consumer. There is a saying in accountancy that “Profit is vanity, balance is sanity and cash is reality”. The reality for business is that tax is cash and, whether it is cash flow keeping the business afloat, paying salaries and bills, or investing cash in new capital equipment or intellectual capital, every good business will have a focus on tax, tax rates and the rules set out by legislatures around the world on how it manages its operations. We also know that Governments require steady tax receipts in order to provide good public services. It was my tax training and business experience that gave me the confidence early on in my parliamentary career to point out to the then Chancellor, George Osborne, that several of the banks, particularly RBS, probably would not pay any corporation tax for a very long time as they could roll over all their losses from the financial crash, year after year. I am pleased to say that then led to a change in policy, so tax losses can only be rolled over for six years. It is important that tax be fair. We should recognise that corporate tax rates and the overall tax burden on companies need to be fair and competitive if we want the economy to grow. We saw how the economy of the Republic of Ireland was massively boosted when it cut its corporation tax rate to12.5% and many companies flocked there, particularly IT companies. That is why the work on transfer pricing, to which the noble Lord, Lord Sikka, referred, has been so important, as ultimately businesses can choose where their headquarters or their science and innovation hubs, or their other key assets, are. Transfer pricing is a fundamental concept in international taxation and corporate finance. It is the way that profits are shared around the world. It involves the pricings of goods, services and intangible assets when they are exchanged between related entities within a corporate group—inter-company transfers of goods or services. Transfer pricing delivers the necessary compliance on taxation and it can be a valuable tool for companies to become more efficient, to manage risk and to bolster economic development in countries and communities. Importantly, especially with the OECD guidelines, transfer pricing is designed to ensure fair competition. It was the Conservative-led Government, using their leadership of the G8 back in 2013, who first brought this issue to task on the global stage after the financial crisis of the late noughties. It was agreed at the G8, and then at the G20 later that year, to have the OECD establish guidelines, as the useful Library briefing points out. The OECD completed its guidelines on BEPS—base erosion and profit shifting. A significant element was introducing the arm’s-length principle, which suggests that intercompany prices should align with those charged between unrelated parties in a competitive market. This principle serves as a cornerstone for many countries’ transfer pricing regulations, promoting fairness and transparency. By appropriately allocating profits and costs among subsidiaries, companies can mitigate the risk of double taxation, which occurs when two or more jurisdictions impose taxes on the same income. Additionally, transfer pricing can help manage operational risks associated with currency fluctuations, and by adjusting transfer prices to account for exchange rate movements companies can stabilise their financial results, providing greater predictability in earnings and cash flows. This stability is crucial for long-term strategic planning and investment decisions. Another important merit of transfer pricing is its contribution to promoting fair competition. By adhering to the arm’s-length principles, companies are incentivised to price their goods and services fairly. That practice helps prevent anti-competitive behaviour for local businesses which otherwise could be undercut by aggressive tax planning. Overall, this is all useful in trying to make sure that we keep up to date in having that level playing field around the world. In June 2019, G20 Finance Ministers agreed to update the OECD proposals, known as BEPS 2, with two main interlocking pillars. Pillar 1 re-allocates part of the profits of the largest and most profitable multinationals from where they earn income to where they sell products and services; pillar 2 would impose a 15% minimum tax on global corporate profits based on the residence of the corporation. I understand that the 15% minimum tax has been controversial, as it removes one of the levers of agile, growing economies. I am also aware that the new US Administration have expressed concerns. However, this is a useful mechanism to make sure that there is fairness around the world. For what it is worth, I think our time would be better focused on making the most of our investment zones and freeports, as well as stabilising tax legislation to give businesses certainty and confidence to invest here and help boost our economy. We should continue to welcome the many corporations that are based here and be mindful of the reasons why some companies are moving their corporate headquarters elsewhere. Companies and communities need each other. Together, companies and communities can and must profit from each other—something on which I hope all noble Lords would agree.

13:02:00

My Lords, I congratulate the noble Lord, Lord Sikka, on securing this debate. He has allowed me to claim in the future that he has been talking bananas, but he knows I have too much respect for him to do that. I congratulate my noble friend Lady Coffey on a truly excellent maiden speech. She has served as Secretary of State for Work and Pensions and for the Environment, Food and Rural Affairs, while representing her Suffolk coastal seat. She is known to love jazz, and as anyone who has been to the Conservative Party conference—which I thoroughly recommend to all noble Lords—knows, she excels at karaoke. In this House, I am sure she will have “the time of her life”—some will know why I say that—which, had I sung it, Hansard would not have recorded, so I think I got away with it. I hope my noble friend has turned off the alarm on her phone, because I do not want my speech to be interrupted by “I Vow to Thee, My Country”, which I gather has happened in the past. There is a rumour that she and the noble Lord, Lord Clarke, are lobbying for a cigar smoking room to be created on the Terrace—I am not sure about that—as she brings gender equalisation even to this area. What she brings to this House, apart from anything else, is much-needed business experience. She is really welcome; it was an exceptional maiden speech, on which many congratulations. This debate features one of my favourite subjects. The Minister knows of others, which he will be pleased to know I will not refer to, but I will focus on two areas, which I believe will generate more tax and revenue for the United Kingdom, because we are keen to work together so to do. The subject that the noble Lord, Lord Sikka, has put forward was the subject of my maiden speech in 2013, made in response to the report from the then Economic Affairs Committee. I have spoken a few times on BEPS, as explained so well by my noble friend Lady Coffey, and the noble Lord, Lord Sikka, is quite right to bring it up. The UK has implemented several legislative measures to address profit shifting by multinational companies and has adopted BEPS measures recommended by the OECD, including the hybrid mismatching rules. These rules prevent tax advantages from differences in tax treatment of entities or instruments between countries. For example, a payment can be treated as a tax-deductible expense in one country and the receipt considered a tax-exempt dividend in another. Then there is the UK corporate interest restriction, which limits the amount of tax relief that companies can claim on their net interest expenses to the higher of £2 million or 30% of EBITDA. It is a very powerful method of preventing private equity avoiding tax. Then there is the diverted profit tax, which was introduced in 2015. This targets profits artificially diverted from the UK, as it imposes a 25% tax on profits deemed to be diverted through schemes. When I first qualified as a chartered tax accountant—which was much to everyone’s surprise, particularly my father’s, at the time—it was the controlled foreign companies rules which were the hot new area. They came in in 1984—I qualified in 1985—and were significantly reformed later, in 2012. These rules aim to prevent UK companies shifting profits to low-tax jurisdictions by taxing the income of foreign subsidiaries of UK resident companies. There has of course always been the transfer pricing rules, which ensure that transactions between related parties are genuinely conducted at arm’s length, and HMRC has issued guidance on that as recently as September 2024. With all this going on, why are we having this debate? It is because of the OECD’s pillars 1 and 2. The UK has one of the most robust anti-BEPS regimes in the world, largely due to measures taken by the previous Conservative Government, but also subsequent actions by the Labour Government. The OECD has led moves to eliminate BEPS since 2012. From the BEPS report in 2015, the UK has implemented pretty much all the material recommendations and closed a number of loopholes. The UK has implemented the first phase of pillar 2 and is implementing the second phase. The UK was one of the group of nations implementing at the very earliest date, along with Australia, Canada, New Zealand and all of the EU countries. But now, as the noble Lord, Lord Sikka, has indicated, somewhat shockingly perhaps, the US has pulled out of both pillars, and this leaves our Government in a quandary. Do we want to avoid retaliation or do we stick to our guns? We have discussed pillar 1 and pillar 2 at length in this House. A number of us were keen on the digital services tax, or DST, and we tried to persuade the Government that it was time to tighten it up. The argument given to us against this was the John Lewis argument: that if you are not careful, you attack shopkeepers trying to sell their products online, as opposed to marketplace providers which simply facilitate a sale. At the time, I worked very hard with a very able tax adviser, Glyn Fullelove, who drafted the legislation— which would have worked—but there was no political impetus to implement it, mainly because we all thought that DST would be a temporary tax while pillar 1 and pillar 2 were properly implemented. This does not look like it is going to happen. Will the Minister look at the DST rules afresh? In his opinion, are they still fit for purpose? Hard choices need to be made on DST—I believe it raised only £380 million last year and might raise about £800 million this year. Given that the Minister wants to help companies grow and raise more revenue, perhaps he might have another look at DST and see whether or not it should be enhanced. On a practical matter, will a consequence of pillar 2 having no force or effect in the US be that US multinationals will no longer share information with non-US subsidiaries? If they do not share this information, it makes pillar 2 compliance and in particular the understated profits rule tax—UPRT—almost impossible. Has the Minister asked the US multinationals with a presence here whether they will have this information from their head office? I appreciate that the UPRT, which yields some £2.8 billion, will be harder to give up—indeed, it should not be given up—but it would be helpful to hear the Government’s plans for it, given that the information collation may be extremely difficult. Another related area that I also believe can be of assistance to HMG in raising revenue is the undertaxation of profits in the UK by VAT evasion of offshore online retailers, which is a form of profit shifting. I am very grateful to Richard Allen, the heroic figure of RAVAS, for all his hard work in this area. As we know, bad actors are selling goods online under £135 to evade VAT and to gain a competitive advantage over law-abiding businesses both abroad and in the UK. Distortions of competition caused by the evasion of VAT cause significant harm to domestic retail, both on the high street and online. This harm in turn damages the UK economy through reduced tax revenue, subsequent employment and so on. Despite recent legislation, which a number of us worked on, there are still obvious flaws in the ID verification system operated by Companies House, and HMRC has essentially enabled bad actors to easily obtain UK company registrations and thus VAT numbers. We have all read about thousands of letters arriving at a flat in Swansea as a result of overseas actors trying to create artificial UK companies. They are pursuing negative and fraudulent behaviour that is essentially the evasion of VAT, and thus shifting profits overseas. Currently, HMRC has no effective mechanism for enforcing VAT on imports below £135 in value. Import VAT is no longer due on business-to-consumer non-excise goods sent in consignments valued at £135 or less. It is assumed that overseas businesses have complied with the UK legislation that obliges them to register for UK VAT, but that assumption is entirely unenforceable and a coach and horses are driven through it. Some constructive ideas—such as a passport scheme where you simply put a sticker on every good that can be scanned as it comes in—are around but have not been enforced. It is true that some measures have been introduced, but there remains a significant and immediate problem. Can the Minister look at this urgent issue afresh and perhaps accept a meeting with Richard Allen of RAVAS, so that we can generate the appropriate and correct revenue for HM Treasury and continue the fight against evasion of VAT?

13:12:00

My Lords, many of the large corporations that affect our lives are multinational enterprises. This circumstance is a product of the process of globalisation that has taken place over the last half century, albeit that some multinational corporations have far longer histories. Most of the multinational corporations originated in a single country to which they may continue to owe a partial allegiance, but this might be regarded as an historical circumstance that is of little relevance today. The Ford Motor Company is an early example of a multinational corporation. The company was incorporated in 1903. The headquarters in Dearborn, Michigan no longer commands its European offshoots, but the headquarters has nevertheless been responsible for major financial decisions. This has detrimentally affected some of the former subsidiaries of the company outside the United States. Two such former subsidiaries were Jaguar and Land Rover, acquired in 1989 and 2000 respectively. Our Government should have intervened to prevent the foreign purchase of these leading British firms; many other Governments would have done so. In 2008 the two companies were sold on to the Indian company Tata Motors when the American Ford company was in financial distress. Tata had previously been involved in a joint venture with the Fiat motor company, which is now part of a multinational Italian, American and French conglomerate known as Stellantis, which comprises Fiat, Chrysler, Citroën and a host of other marques. This conglomerate was created in 2021 and is headquartered in the Netherlands. It is a paradigm of a modern multinational corporation. The question arises of whether there are disadvantages from this sort of globalisation that might be experienced by the subsidiary companies and by the countries in which they are located. The history of Jaguar Land Rover demonstrates the manner in which a native enterprise can acquire a global reach. The firm is now set to penetrate the Chinese and Indian markets. It is arguable that it would not be in such a position if it had remained solely in British ownership. However, when such a company becomes part of a much larger organisation it is in a dangerously subservient position. It can be affected by circumstances within the larger organisation over which it has no control, and which can be to its detriment. The sale of Jaguar Land Rover to Tata was occasioned by the financial distress of the Ford Motor Company, which had purchased the firms in an attempt to enhance its own profitability. The professor, my noble friend Lord Sikka, has highlighted some severe abuses arising within multinational corporations that can affect their subsidiary companies and the nations in which they reside. The profits of a firm can be used by the parent company to sustain other, less profitable parts of the enterprise, when they might have been used for the firm’s own investments. He has pointed to the ways in which multinational corporations can conduct internal trade at fictitious and exorbitant prices to enable them to evade taxes on a massive scale. They can assign the costs of their enterprise to subsidiaries in countries where there are high taxes, and they can assign their profits to subsidiaries in countries in which there are low taxes. By appearing to make losses in the high-tax domains, they can avoid being taxed, and by declaring them elsewhere, they can retain a large part of their profits. To overcome these abuses can require considerable resources and strong co-ordination between the affected nations, which may have vastly different tax regimes. The UK has a financial services industry of a disproportionate size when measured against the size of its gross domestic product. It is inevitable that it should be in the forefront of advising and facilitating the stratagems of tax avoidance. A dramatic case of tax avoidance that has recently come to light concerns the Russian oligarch Roman Abramovich. He has been residing and trading within the UK. However, his trades and hedge fund operations have been attributed to the British Virgin Islands, a so-called tax haven. In a defence against the charges of tax evasion, the oligarch’s lawyers have declared that he has “always obtained independent expert professional” opinion and legal advice, and has “acted in accordance with that advice”. This brief assertion reveals two things. The first is that there are plenty of people at hand in the City of London to advise on how to evade the British laws of taxation. The second is that those laws are weak and easily exploited. Our financial sector has mediated many of the acquisitions and takeovers that have created large multinational corporations. In the process, we have lost the ownership of many of our premier enterprises. Our national interests have become subservient to the interests of the multinational corporations to an extent that is probably unprecedented in the developed world. The UK has lost ownership and control of its major public utilities and of its strategic industries. Utilities in which foreign ownership dominates include electricity generation, water, seaports, airports, railways, rolling stock and much more. The majority of motor manufacturers in the UK are under foreign ownership, a large part of our aviation industry has been sold to foreign owners, we are no longer the owners of our steel industry and most of our cement manufacturing is in foreign ownership—the list could be continued almost indefinitely. The British financial sector and British banks differ markedly in their behaviour from those in adjacent countries. They have had a long history, and they were originally involved in trade and financial intermediation. Formerly, continental banks were involved principally in agricultural credit, and then they began investing in manufacturing. This may partly explain our nation’s comparative failure to invest in manufacturing, despite the fact that we were the original industrial nation. Our banks and financial sector invest preponderantly in property and financial assets. The profits are derived from the commissions earned in mediating mergers and takeovers among firms. A major source of income has come from selling our industrial assets to overseas owners. The sale of our assets to foreign owners has enabled us to maintain a large deficit on our current account; the value of the goods that we import far exceeds the value of those that we export. The sale of our assets has also sustained a demand for the pound in international currency markets. This has inhibited our exports by raising their prices for foreign purchasers, which has also been a factor in our industrial decline. A nostrum to alleviate those problems, propounded by the previous Government, has been to encourage foreign direct investment, which was the theme of the Harrington report that was commissioned by the Conservatives. Such a strategy will invite multinational corporations to enter the British economy. It will add to a deadweight loss, which is the remittance overseas of dividends and interest payments. Those are an incalculable drain on our national income. The noble Lord, Lord Harrington, observes that, when the Government invest, the private sector follows, and that £1 of government investment can unlock between £7 and £10 of private sector investment. He recommends that the Government should become an active investor. The present Government are also pursuing foreign direct investment. However, they seem to be unwilling to become an investor; they would prefer to rely almost completely on foreign capital.

13:21:00

I will speak briefly in the gap. I want to ask my noble friend the Minister about the measures that can be taken. The issue has been set out very clearly, but is the Treasury considering steps such as strengthening HMRC’s enforcement of transfer pricing? Is it considering the idea of withholding tax on intergroup payments and generally tightening its anti-enforcement rules?

13:22:00

My Lords, first, I welcome the noble Baroness, Lady Coffey. She made a fascinating maiden speech; I thank her for it. Her interest may be in bins, but by speaking in this debate, she has, either voluntarily or involuntarily, joined the society of financial geeks who speak about tax issues in this House. I am the least expert of them, so I am glad that she has now joined the cast. I thank the noble Lord, Lord Sikka, for obtaining this debate; it is very timely and important. He helped us all by explaining base erosion and profit shifting— BEPS—which is, in essence, the use of artificial transactions to shift profits into tax havens or lower-tax jurisdictions and avoid the taxes that would otherwise have been payable in the country where the profits arose. At the global level, the OECD estimates that, annually, some 4% to 10% of global corporate tax revenue is lost through BEPS. The Tax Justice Network alleges that the losses are almost double the OECD estimate and that a network of British Crown dependencies and overseas territories is responsible for some 23% of those losses. Discussions of Crown dependencies and overseas territories are for another day—there is a very complex debate to be had—but I point to the experience that the noble Viscount, Lord Hanworth, referred to: the exposure yesterday of the Abramovich tax avoidance scandal. It was exposed publicly by a group known as Cyprus Confidential. It underscores how limited HMRC’s capability is to pursue large tax avoiders and their enablers. I join the noble Lord, Lord Davies, in asking: what kind of remedies could be put in place? As the noble Lord, Lord Sikka, said, we could use a great deal more clarity on what exactly is being lost to the UK; the tax gap is not an adequate way to try to analyse or to expose this set of problems. We need to take some credit here in the UK, because under different Governments we have sought to join international efforts to tackle BEPS. In many ways, we have been a leading voice in developing the OECD’s two-pillar strategy, which is supported by 135 countries and jurisdictions. Under it, pillar 1 would reallocate part of the profits of the largest and most profitable multinationals from where they “earn income” under accounting rules to where they “sell” products and services. Pillar 2 would impose a 15% minimum tax on the global corporate profits of multinationals with over €750 million in turnover based on the residence of the corporation. The OECD estimates that, by implementing pillar 2, global tax paid by the world’s biggest multinationals would increase by $192 billion per year. Although multinationals in a number of sectors use profit shifting—the noble Viscount, Lord Hanworth, talked about the motor industry—the sector of most concern, by far, is the technology sector, which has so many tools to use in profit shifting. Frankly, here we are primarily talking about US-based corporations. I looked at the actions that the UK has taken. As the noble Lord, Lord Leigh, said, in 2015 there was the diverted profits tax; it did not raise a lot of money, but it led to some changes in behaviour. I join the noble Lord, Lord Sikka, in asking: why has country-by-country reporting ended up getting dropped? Perhaps the Minister can help us with that. In 2020, the UK implemented a digital service tax of 2%, reflecting its concern that foreign—again, primarily US—technology multinationals were profit shifting to reduce their UK tax bill. The DST raised £678 million for the Treasury last year, predominantly from Google, Amazon and Apple. The tax also provides a more level playing field for UK-based technology firms. As the noble Lord, Lord Leigh, said, it is described as a temporary measure until pillar 1 is completed, which, I think, is why attention has not been paid to it. I join him in suggesting that it is time that the Government looked at the DST, to see if it could be enhanced in ways that would better represent both the loss of gross revenue and the unevenness of the playing field. To enact pillar 2, the UK introduced in 2024 a multinational top-up tax—MTT—and a domestic top-up tax, DTT. The Finance Bill, which is now making its way through Parliament and which we will receive although we will be unable to amend it, is intended to complete the UK legislation for pillar 2 by introducing the undertaxed profits rule, UTPR. This is the bit with teeth. As the noble Lord, Lord Leigh, said, it is estimated to bring in about £2.8 billion a year. There is a real question, as far as I understand, about when this will be implemented, once the legislation is passed. Can the Minister give us some clarifications on the date? There are growing concerns that, potentially, it could be kicked into the long grass. The problem is, as we can all anticipate, the arrival of President Trump. He very clearly said that the OECD agreement on BEPS has “no force … in the United States”. It has withdrawn from all the relevant treaties, but this is a far stronger statement. In November, the FT printed an article entitled “Trump win puts global corporate tax deal ‘in peril’”. It suggested that countries would be too scared to apply UTPR to US-based companies for fear of punitive tariffs. Indeed, the big tech companies, which have the US President’s ear, as we all know, have said very clearly through their lobby groups that they plan to use trade negotiations to push back strongly against even the UK’s existing 2% digital services tax. To add another complication to all this, in a rapidly changing world, we have cryptocurrency. I regard cryptocurrency basically as pyramid schemes masquerading as technology, but they can certainly provide a mechanism for bad actors who want to carry out any kind of tax avoidance, including profit shifting. I am interested to know how this changes the thinking of the Government and HMRC in trying to keep a grip on the profit-shifting strategies that are increasingly employed. One thing I would suggest is that it is time to make sure that we link up with potential allies who are also willing to stand firm against base erosion and profit shifting. We know it is the EU; I suspect it is also Canada and Japan, and there should be others. My party has called for the Government to seize the opportunity of a pan-Europe customs scheme as a mechanism which would perhaps help us pull together our relationship with the EU but then also engage with other allies around this issue. I ask the Minister: are we in discussion with others who share our worldview on how we keep alive the strategy to end base erosion and profit shifting in this new Trump era? This really has to be done collectively, because it is one of those areas where we either hang together or, frankly, we hang separately.

13:32:00

My Lords, I begin by congratulating my noble friend Lady Coffey on her excellent speech. I eagerly look forward to working with her and taking advantage of both her ministerial and business experience. It is not every day that one speaks after a former Deputy Prime Minister, and I share her love of culture, racing and music. I was pleased to hear her refer to our own noble friend Lady Stedman-Scott and to her time at the DWP, where I undertook a review of the state pension age, which, at the time, was quite widely welcomed. I always wondered who was behind that amusing judgment on Jaffa cakes—now we all know. I also agree with my noble friend that where companies are headquartered is very important. In my own experience, there are pluses, such as R&D centres and community outreach, which are usually lost when companies move abroad. We need a Government who promote investor confidence and certainty, as my noble friend explained, in order to keep our innovative companies in the UK and attract new ones. As the noble Baroness, Lady Kramer, did, I thank the noble Lord, Lord Sikka, for initiating this debate. He and I sometimes agree on what the Government are doing wrong, although our philosophies are different. He has set out a coherent set of principles from a left-wing perspective. I think differently, not least because I believe in the importance of the private sector and innovative companies in driving growth, but that does not detract from his consistency and persistence. For decades, some multinational corporations have funnelled billions of pounds in profits to minimise tax, especially to lower their exposure to corporation tax. This is achieved by various methods. For example, a company may sell intellectual property to a subsidiary in a low-tax country and pay the subsidiary for the use of that intellectual property, or goods and services may be traded between subsidiaries at manipulated prices to allocate profits to the tax haven entity. We have heard examples from the noble Viscount, Lord Hanworth, including the reports this week about the arrangements for the Abramovich yachts. What is the Government’s attitude to that arrangement? That said, it is imperative that businesses and their capital should be able to move freely so that there is international investment and the benefits of comparative advantage are realised. The previous Government made significant progress in tackling the transfer of businesses’ profits to low-tax and no-tax locations. We constantly stressed our commitment to combating tax avoidance and pledged to raise an additional £6 billion annually. In 2018, we announced a digital services tax to ensure that digital businesses paid tax that reflected the value they derived from UK users, as an interim measure, pending an international agreement to reform the corporate tax framework. I supported it in this House, drawing on my own experience in the retail sector, where the tech giants held an unfair advantage because they did not pay much VAT and had much lower business rates. That reality has not changed. The noble Baroness, Lady Kramer, said that it was the sector of most concern to her. Then, in 2022, as we have already heard, we confirmed that we would implement the OECD pillar 2 rules for a global minimum corporate tax rate, for accounting periods beginning after 2023. Pillar 2 applies a “global minimum tax” of 15% to the profits of multinational groups whose revenue exceeds €750 million per year. Provision to this effect was included in the Finance Act 2023 and further provisions were included in the Finance Bill 2023-24. As a result, the OBR estimated that the implementation of these reforms could raise £2.8 billion in 2028-29. Due largely to measures taken by the previous Government, as my noble friend Lord Leigh of Hurley said, the UK has one of the most robust anti-base erosion and profit shifting regimes in the world. That was the position until very recently. But the US has always been unenthusiastic about this whole process and this attitude is most marked in the Republican Party. The US has very recently withdrawn from the OECD deal in full. This is explosive stuff. US firms are some of the most prominent among those whose activities have caused the problems to which I have referred. The US announcement upends all plans and expectations. There are strong hints that UK interests might be adversely affected as a consequence. For example, our digital services tax and the undertaxed profits rule might be in the present Administration’s sights. The Minister may be able to confirm the sums involved. As I understand it, DST was forecast by the NAO in 2022 to raise £862 million by 2024-25. UTPR is only just beginning to take effect but is due to raise £550 million by 2029-30, according to the HMRC policy paper of last October on multinational top-up tax. In short, the path along which we were proceeding now looks to be full of problems. An alternative to sticking to these taxes is the risk of costly tariffs if an accommodation cannot be found with the Trump Administration; in other words, the world has changed and we need to reflect how best to respond to this change. What is the Government’s assessment of all this—including my noble friend Lord Leigh’s question about the impact of the future lack of information sharing? How will they respond and, most importantly, how will they protect UK interests? I look forward to hearing the Minister’s thoughts on this extremely important issue. The disadvantages of corporations shifting profits to low-tax or non-tax jurisdictions are well known; there is no need for me to go on about them, except to say that they represent a serious problem for UK economic interests. These disadvantages apply whatever the US Administration might do, but we now need a fundamental rethink about how we can best deal with these disadvantages in the world as it now is and tackle the problems that we jointly see. My noble friend Lord Leigh of Hurley has come forward with various alternative proposals on VAT and its enforcement. In 2021, the Conservative Government introduced changes to limit profit shifting, from which the OBR then scored substantial revenue. If there is good reason to believe that these have not been as effective as they should have been, as my noble friend suggested, I would encourage Ministers to look at them again. I believe that his points merit serious consideration. I had intended to end by outlining how the Government’s recent actions have damaged the economy. It remains true that, by talking the economy down, making large increases in employment taxes and crushing companies under new employment regulations, the Government are making fundamentally wrong and anti-growth choices. The consequence is a flat economy killed stone dead by the Budget—even Tesco followed Sainsbury’s with job cuts this week—and a potentially chilling effect on investment from overseas. Yet these actions—foolish as they were—are only marginally relevant to today’s subject. It is well-run businesses in a thriving public sector that create jobs and wealth. They rely on the Government of the day to deal with the complexities of international tax and negotiate arrangements that are effective and fair to UK plc. The Trump challenge on tax is serious and I look forward to hearing how the Government plan to address it.

13:41:00

My Lords, I congratulate the noble Lord, Lord Sikka, on securing this debate, and thank all noble Lords for their contributions. I also take this opportunity to join others in congratulating the noble Baroness, Lady Coffey, on her maiden speech and welcoming her to your Lordships’ House. I will seek to set out the work that the Government are doing to uphold internationally agreed principles of fair tax competition and protect the UK against profit shifting by multinational companies. If there are any specific questions raised during the debate that I am unable to answer now, I will happily write to noble Lords. I start by underlining our commitment to growth—the number one mission of this Government—and how the corporate tax system can help deliver this mission. As the noble Baroness, Lady Neville-Rolfe, mentioned, we had to take some difficult decisions in the Budget last year to restore stability to the public finances. These were not decisions that we wanted to take, but they were necessary to clear up the mess we inherited. We recognise that this has impacted some businesses and has had impacts beyond business, too. However, in last year’s Budget we also published a corporate tax road map to provide the best possible conditions for incentivising business investment, which is the lifeblood of a growing economy. That road map caps corporation tax at 25% for the duration of this Parliament—the lowest rate in the G7. It maintains our world-leading capital allowances system, including permanent full expensing, and the £1 million annual investment allowance. As a result of permanent full expensing, the independent OBR has forecast that business investment will increase by an extra £3 billion each year. Permanent full expensing solidifies the UK’s position at the top of the rankings of OECD countries’ plant and machinery capital allowances and among the most competitive capital allowances in the world. The corporate tax road map also maintains generous R&D tax reliefs that will support an estimated £56 billion of business R&D expenditure. It is a road map to provide predictability, stability and certainty to business and investors from around the globe, while generating the revenue needed to invest in Britain. It comes after several years of cliff edges in investment allowances and multiple changes in rate policy, all of which have undermined global confidence in our corporate tax system. Despite the difficult fiscal position, our capital gains tax rate also remains internationally competitive and the current top rate is lower than it was between 2010 and 2016. The Government’s objective is to maintain an internationally competitive tax system, where businesses pay their fair share of tax in the UK. As noble Lords know, under the current international framework, taxing rights are generally allocated to countries based on where the physical activities of a given business are undertaken. However, businesses rely increasingly on remote business models that allow companies to operate in and make considerable revenue from a market without a physical presence there. This is particularly true of firms providing digital services. Added to this, business models are increasingly complex and globalised in nature, with businesses often operating in a number of jurisdictions. Intangible assets, such as intellectual property, can also be transferred to low-tax or no-tax jurisdictions more easily than physical goods. These changes are improving competitiveness and dynamism in the global economy, but we now need to ensure that our tax system, much of which dates back over a century, adapts to this changed environment. According to the OECD, lost global tax revenues now total $100 billion to $240 billion annually—equivalent to between 4% and 10% of global corporation income tax revenues. This is why the Government are committed to addressing unfairness in the international tax system and protecting the UK against base erosion and profit shifting, where it exists. We have a range of different measures in the UK tax code to ensure that this is the case. For example, measures on transfer pricing ensure that companies do not manipulate prices between related parties for tax reasons. Controlled foreign company rules, which the noble Lord, Lord Leigh of Hurley, mentioned, prevent multinationals shifting profits to low-tax jurisdictions using controlled foreign subsidiaries. Our anti-hybrid rules tackle tax avoidance strategies that exploit differences in the tax treatment of financial instruments or entities across jurisdictions, and our corporate interest restriction rules limit the amount of interest expense that a UK company can deduct from its taxable profits. HMRC conducts rigorous in-depth inquiries to ‎ensure that multinational companies comply with these rules, and it also works closely with international partners to gather intelligence and tackle serious and deliberate non-compliance. Profit shifting and base erosion is a global issue by its very nature, which is why the UK has supported efforts to strengthen the international tax framework. The most significant of these is the OECD’s inclusive framework on base erosion and profit shifting project, as explained by the noble Baronesses, Lady Coffey and Lady Kramer, and my noble friend Lord Sikka. As other noble Lords have set out, this framework is the result of over 135 countries and jurisdictions working together, and comprises two pillars. Pillar 1 looks to provide for a more stable and certain international tax system by addressing the issue I raised previously; namely, updating the system of international taxing rights to reflect the digitised nature of the economy. Under plans currently being discussed, a new system would be introduced whereby certain taxing rights are reallocated to market jurisdictions, as opposed to where the company is based. The noble Lord, Lord Leigh of Hurley, asked about the Government’s position on pillar 1 and the digital services tax. The Government continue to support an agreement on pillar 1 and, as a temporary measure, the UK’s digital services tax currently applies a 2% levy on providers of search engines, social media platforms and online marketplaces, reflecting their UK activities. We look forward to working with the new US Administration to understand their concerns around the digital services tax and consider how these can be addressed in a way that preserves the policy objectives. The noble Lord also asked about the VAT paid by online retailers. To summarise, as the noble Baroness, Lady Neville-Rolfe, set out, since 2021, overseas retailers are requested to register for VAT on supplies of low-value imports below £135. Where an overseas seller sells goods via an online marketplace, the marketplace is liable for VAT on goods of any value. The OBR continues to estimate that this will raise £1.8 billion by 2026-27. Pillar 2 of the OECD inclusive framework reforms, also known as the global minimum tax, is already an internationally agreed common approach. It creates fair conditions for attracting inward investment, while protecting countries’ tax bases from large multinationals shifting their profits to low-tax jurisdictions. It does this by requiring multinationals that generate annual revenues of more than €750 million to pay an effective tax rate of 15% on their profits in every jurisdiction where they operate. Where their effective tax rate falls below this, these companies will pay a top-up tax. This effectively imposes a floor on tax competition between jurisdictions. As the noble Baroness, Lady Kramer, said, the Government are currently legislating for the final part of the pillar 2 agreement through the Finance Bill. The undertaxed profits rule will ensure that firms cannot evade their responsibilities under the global minimum tax. The pillar 2 agreement is historic in its scope and reach and has been implemented, or is in the process of being implemented, by the UK, all EU member states, Canada, Australia, Japan, New Zealand, South Korea and others. The UK is forecast to raise more than £15 billion over the next six years from pillar 2 to support our public services and help grow the economy. My noble friend Lord Sikka and the noble Baronesses, Lady Kramer and Lady Neville-Rolfe, asked about executive orders relating to pillar 2. While I know that they would not expect me to give a running commentary on every executive order or decision made by President Trump and his Administration, the UK will of course be open to discussing concerns and ways to alleviate these in a way that upholds the policy aims of pillar 2. To reiterate—here I agree with the noble Baroness, Lady Kramer—this is an international agreement signed by over 135 countries after many years of detailed negotiation. We believe it represents a fair approach to how countries compete for cross-border investment. The UK operates a comprehensive network of tax treaties to ensure the correct allocation of taxing rights between jurisdictions. Alongside pillars 1 and 2 of the OECD scheme, we participate in a range of other tax transparency arrangements to protect the UK tax base. These include the country-by-country reporting arrangements, which require large companies to provide a detailed report of their income, taxes paid and other financial activities on a country-by-country basis. We have committed to implementing the crypto asset reporting framework to facilitate the automatic exchange of information on ownership and transactions in crypto assets. The UK is leading international efforts to co-ordinate transparency and the exchange of beneficial ownership, including through registers. The noble Baroness, Lady Kramer, touched briefly on the Crown dependencies and overseas territories. I recognise that that is a much longer debate but I will briefly say this. The elected Governments of the Crown dependencies and inhabited overseas territories are responsible for many fiscal matters, including tax. They are committed to upholding international tax standards. All Crown dependencies and those overseas territories with a financial centre have become members of the OECD/G20 inclusive framework on base erosion and profit shifting. They have implemented the common reporting standard, and they all meet the standard necessary for the exchange of information on request. My noble friend Lord Sikka and the noble Baroness, Lady Kramer, asked about country-by-country reporting. As I have said, the Government are a strong supporter of greater tax transparency and efforts to ensure that multinational groups are appropriately taxed in the jurisdictions in which they operate. While public country-by-country reporting could have a role to play in supporting those objectives, the Government believe it is important that any action be co-ordinated at the international level to ensure that it is comprehensive and consistent and avoids competitive distortion. The arrangements I have already set out sit alongside the steps this Government took at the Budget last year to protect the UK tax base and close the tax gap, which is the difference between the amount of tax owed and the amount that is collected. The measures in last year’s Budget represent the most ambitious package ever to close the tax gap, making sure that everyone who should be paying their tax is doing so. Overall, the package is expected to raise £6.5 billion in additional tax revenue per year by 2029-30. We will achieve that by investing £1.9 billion in HMRC staff and modernised IT systems, including recruiting an additional 5,000 compliance staff. This includes additional resources for HMRC transfer pricing specialists, focused on preventing multinational profits shifting. I will briefly address the question asked by my noble friend Lord Davies of Brixton and the noble Baroness, Lady Kramer. Our plans include new proposals to close the offshore corporate tax gap. We will consult on lowering the thresholds for exemption from transfer pricing for medium-sized businesses to align with international peers, and we will seek views on introducing a requirement for businesses in scope of transfer pricing rules to report cross-border-related party transactions to HMRC. My noble friend Lord Sikka questioned the size of the tax gap. The Government have set out data for the domestic tax gap, which has been published online, as well as initial statistics on individuals with undisclosed foreign income. We will continue to be led by this data, and we remain committed to closing the tax gap, both domestic and offshore. This Government support fair global rules on tax competition which protect the UK against profit shifting and base erosion. Through the action we are taking domestically and through international bodies, including the OECD, we are ensuring that these rules keep pace with the changing nature of global trade and the development of digital technology. In doing so, we are being guided by our number one mission: higher and more inclusive economic growth. That growth must be underpinned by fairness in the global tax arrangements, which is at the heart of our approach, and it must be delivered through a competitive domestic tax regime, which is precisely what our world-leading corporate tax road map will help to achieve.

Before the Minister sits down—admirably well within his time—I think his answer in respect of my VAT point relates to NETPs, non-established taxpayers, rather than taxpayers who falsely claim to be in the UK. I invite him to consider that particular point further, because I believe it will raise billions of pounds for HMRC if that loophole is addressed. Secondly, he very elegantly sidestepped the issue of the digital services tax. Again, while the Government are in negotiations with the US, which could stretch on for years, there is an opportunity in the meantime for us to have a look to see what extra revenue we can raise through digital services tax.

I have set out as much as I am able to at the moment on the noble Lord’s latter point on the digital services tax, but I will happily raise his point on VAT with my colleague the Exchequer Secretary. We will write to the noble Lord on anything that we can usefully add.

13:55:00

My Lords, I thank the noble Baroness, Lady Coffey, for her excellent speech. I look forward to interacting with her in the months and years to come. I also thank all other noble Lords for their contributions. I think this issue will become more, acute because successive Governments have shifted profits away from corporations to what I call normal people. They have been given the choice: either pay more for crumbling services or lose hard-won social rights completely. Therefore, the way we treat corporations and corporate power will become a vital issue for debate. Transfer pricing rules are now broken, because world trade is dominated by a handful of companies, as I indicated earlier. Numerous actors are dominated by very few companies, which means arm’s-length prices are almost impossible to find. Some noble Lords may have noted that the BRICS countries, especially Brazil, and others have developed their own way of applying arm’s-length prices because companies have been abusing them. That is also worth looking at. I am sure there will be lots of reflection on the various contributions, but my final point is that a UK resident company is liable to pay UK corporation tax on its global profits, subject to tax treaties and double taxation agreements—in other words, giving benefit after credit for the taxes paid somewhere else. If those companies’ profits are not taxed anywhere that means the UK Government can tax them, but I have not come across any example of where any Government have actually done so, so there are billions of pounds waiting to be collected. Perhaps in the next debate—I might try my luck next year—we can have this point clarified. Once again, I thank all noble Lords.