National Insurance Contributions Bill

The hon. Member for Hartlepool (Mr. Wright) said that he did not begrudge the fantastic bonuses earned by people in the City of London, but he seemed unhappy at the City’s success in promoting income for the UK. I find it hard to understand what he meant. It is fair to say that for a long time there has been a great deal of invention when it comes to payment. The practice started in the late 1980s and early 1990s with the use for payment purposes of gold bars or red wine. That was an extreme attempt to abuse the tax system, and the Paymaster General has said that the Bill is designed to deter such behaviour. It may be inevitable that such deterrence must be continually reinforced when a tax system is complicated and encourages the former colleagues of the hon. Member for Hartlepool to indulge in yet more invention. I listened carefully to the hon. Member for Stoke-on-Trent, South (Mr. Flello), who said that he had colleagues who could find a way around any proposal within two hours of its announcement in a Budget speech. Although I approve of the Bill’s proposals to bring NICs into line with the income tax avoidance regime, it is a pity that the House should have to devote so much effort to simplifying the tax system. The complication of the tax system has been compounded by the imposition of many regulations since 1997, which has served to fuel the further growth of the tax avoidance industry. The implementation of a general anti-avoidance rule in a one-sided, broad-brush attempt to simplify matters for the Treasury is unreasonable, given that it maintains a web of bureaucracy for business. I also listened carefully to the hon. Member for Twickenham (Dr. Cable), who asked whether the aim should be to have a correct level of taxation—as the hon. Member for Hartlepool maintained—or a fair one. I, too, shall quote Edmund Troup of Simmons and Simmons, who said:"““Faith in general anti-avoidance provision is based on a lack of understanding of the real nature of tax avoidance. The popular idea is too often confused with the claim that ‘tax avoiders are paying less than they should’, even though there is no objective way of determining how much they ‘should’ be paying.””" The balanced way to reduce tax avoidance is to simplify the system and cut down the number of limits and exemptions. As has been noted, the shadow Chancellor’s tax reform commission is a step in the right direction. A flat taxation system would be likely to promote the payment of more tax, rather than less, and would certainly discourage avoidance. The Paymaster General has said:"““The Exchequer is entitled to certainty on behalf of the taxpayer—certainty that taxpayers will pay their fair share—and, similarly, that taxpayers who contribute their fair share have a right to expect others to do so.””—[Official Report, Standing Committee B, 21 June 2005; c. 57.]" That is reasonable, but any assessment of what constitutes a fair share must be subjective when it is made in the context of a tax structure as complicated as ours. Simplifying the system would remove the motivation for tax avoidance. As my hon. Friend the Member for Cities of London and Westminster (Mr. Field) said, it is important that we promote the role of wealth creators rather than wealth protectors. The question of retrospection is the most important element of the Bill. It is something that the UK has always steered away from instinctively. Yet, for all the Paymaster General’s reassurances, not only does the Bill allow for retrospective action, it also moves the decision away from primary legislation to regulation. In opposition, the Paymaster General said of value-added tax:"““In such a case, the retrospective nature of the law is in principle objectionable. It means that the VAT liability of supply can be changed by an event occurring after the supply is made. There may be arguments that the principle is contrary both to United Kingdom principle and to EC law.””—[Official Report, 3 April 1995; Vol. 257, c. 1412.]" Yet a decade later—