Leaving the EU could encourage ‘greater promiscuity’ in corporate tax policy according to Labour MP and former Public Accounts Committee chairwoman Margaret Hodge
She raised concerns that once the UK had completed the Brexit process that the Conservative government may believe the only way for the British economy to survive would be to create tax haven-like conditions.
‘My worry with Brexit if we bring it into that context is that the government will think that the only way we can survive post-Brexit will be by creating tax haven conditions here in the UK, and all you do there is create a race to the bottom,’ she told journalist Owen Jones on his YouTube channel.
‘That’ll be a short-term advantage, but capital is very promiscuous and they’ll come here for a bit and when someone else has a lower tax rate it’ll just disappear.’
Hodge is noted for the stormy sessions she presided over covering tax avoidance of large corporations and HMRC’s performance. She spent five years on PAC in the during the coalition government’s term, before handing over to Meg Hillier in 2015.
On the Conservatives-led governments since 2010, she said they have been ‘facing both ways’ on tax policy, acknowledging their pursuit of the OECD’s Base Erosion and Profit-Shifting (BEPS) project and allocation of funds to HMRC to combat tax avoidance.
But, she said, they had demonstrated dichotomous policy and ‘introduced changes in our tax system which actually creates tax haven-style conditions like Ireland, like Luxembourg, like the British Virgin Isles.’
Turning her attentions to the tax profession, she said secondments from firms to Treasury as law is designed is ‘one of the most insidious observations I’ve had in the years of looking at tax’.
‘The businesses, the advisers, the lawyers all say “it’s your fault, you’ve written bad law”, and I do accept some culpability and I don’t excuse the Labour government’s failure to do that. I think we should write less law in tax and I think we should write it clearer.
‘But if we could write law with no ambiguity and with no loopholes, we’d have done so. The mere fact there is an army, like the Big Four, the lawyers, the banks, all looking for these tax loopholes demonstrates however well you write the law, you will never avoid the loopholes. There are just too many circumstances.’
