Cross-border Trade and Accounting

Another important point is that as companies are developing, intangibles and intangible assets are becoming more and more important in their valuation. In fact, just a few years ago it was recognised that around 80% of the value of the S&P 500 is in intangible assets rather than tangible assets. That is why the development of accounting systems is so important: we need to be able not only to capture the value of our physical assets, and use the traditional accounting fair-value methods to make sure that those assets are held at the right value, but to look at new methods of valuing intangibles, because the intangibles of brands and, to a certain extent, intellectual property, along with other new technological advancements, mean that it is increasingly the case that less and less of companies’ value is being captured on our stock exchanges, and that obviously has an impact on the prices that are traded and the returns that can be made by companies and customers throughout the country.

As I said earlier, a number of systems have come into the accounting sphere that can help smaller businesses to improve and be more effective. One of them is Xero and another is QuickBooks, and there is also Oracle for large companies. I should say, for the sake of fairness, that plenty of other accounting systems are available. The point of these systems is to make sure that, from the base transaction and from the base-level accounts receivable and accounts payable systems, right the way up to the highest-level strategic decision making, managers and users of the information have the correct information —the one source of truth—and that there is consistency in the data right the way through the organisation. That is for the benefit not just of the actual company, but of HMRC and our Government. The better the records we receive, the more accurate the accounts are and the more accurately we can calculate the tax take for those companies as well. Obviously, it is always a good thing that not only should taxes be low, but companies and individuals pay the taxes that they do indeed owe.

In the current context, as we move between accounting systems, I would like to apply some of this to the discussions that we have been having on Northern Ireland. The reason why I take this leap—some might see it that way—is that many of the accounting systems that are imported now are connected to HMRC to help companies and individuals file their tax returns. They are also connected to HMRC for the purpose of VAT filing. As we know with Northern Ireland, VAT and customs have been a key issue in the new withdrawal agreement, and I will explore that a little bit more—hopefully with help from my colleague from Northern Ireland.

This is not just an issue for the United Kingdom and the EU. I had the great fortune to work in China and the United States before I came to this place, and was able to see some of their tax collection and accounting systems in progress. China is an enormous country of over 1 billion people, but a significant amount of accounting records are still kept in paper format—this was back in 2008, so some of the new software was not available then—and everything is signed off by an original chop. For those who do not know, that is a traditional stamp. A record, fapiao or receipt needs a traditional ink chop to be recognised for accounting purposes; multiply that by over 1 billion people, and it becomes more of an issue.

Let me turn to my ask of the Government. The Conservative and Unionist party has always been the party of business. Brexit has obviously taken an enormous amount of Government time. When Parliament is returned—and I hope that I and my hon. Friends on these Benches will also be returned, as well as the hon. Member for Strangford (Jim Shannon)—I hope that we will start putting more Government time and effort into progressing systems such as Making Tax Digital, and providing training and incentive programmes to small and large companies so that they invest in their systems. That will mean that they will have more efficient and effective trade, and can make the most of the great trade deals that the Minister is looking to implement when we return to this place and leave the EU.

Better accounting systems would also be great for UK consumer rights, because they provide a greater level of transparency, detail and trust. As I am sure the House will appreciate, in the 21st century trust is an enormous issue for consumers in the United Kingdom and around the world. The greater levels of transparency that companies can provide about their products and ways of operating—whether with regard to tangible assets, intangible assets, sales receipts or the taxes they are paying—the greater the faith that consumers will have in them. I can see my hon. Friend the Member for Stirling (Stephen Kerr) smiling at me. He will have received, as I have, many emails from people complaining about multinationals such as Amazon not paying the right amount of tax. I know that they use efficient accounting systems and I am sure that the Government are working with them to try to make sure that when tax is owed it is paid. Accounting systems can provide that level of transparency to give customers faith that where sales are made, the right level of taxes are paid as well. That is the case both for large and small businesses.