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Orders of the Day

Electronic Communications Bill

As amended in the Standing Committee, considered.

4.11 pm

Mr. Alan Duncan (Rutland and Melton): On a point of order, Madam Speaker. I notice, as will the House, that new clause 1 has not been selected. In no way do I challenge your ruling, Madam Speaker, or ask for an explanation because, by convention, no such explanation is provided. Given that the new clause would have covered an important part of the Bill having a significant bearing on interlocking legislation between here and the European Union, I seek your confirmation that the new clause as tabled would have fallen within the long title of the Bill.

Madam Speaker: I do not usually give explanations, but it was totally beyond the scope of the Bill.

Mr. Nick St. Aubyn (Guildford): Further to that point of order, Madam Speaker. Will you confirm that no precedent is set in this instance, in that the proposed new clause was not considered because there is a draft European Union directive in circulation that conflicts with it?

Madam Speaker: Order. There will be no explanation of my selection of amendments. Either the hon. Member intends to move the motion or not. Is he moving the motion?

Mr. St. Aubyn: I will be happy to move the motion, Madam Speaker. I believe that my hon. Friend will be here shortly. [Laughter.] I support the motion with him.

New Clause 3

Country of origin

'When the country of origin differs from the country of destination for a service or product contracted through the medium of an electronic communication, the vendor shall fully disclose prior to binding confirmation of such contract the liability of the purchaser of such service or product for any duties, taxes or other levies arising in the country of destination; and the purchaser shall otherwise be entitled under English law to retain or reclaim from the vendor or his United Kingdom agents the amount of any such duties, taxes or other levies lawfully demanded by the tax authorities in such country of destination.'.--[Mr. St. Aubyn.]

Brought up, and read the First time.

Mr. St. Aubyn: I beg to move, That the clause be read a Second time.

This important new clause would have the effect of ensuring that taxation across borders is properly addressed by the Bill. More and more people are buying products on the internet from other countries. Where the value of a purchase is above a small threshold of about 28 ecus or £18, duty falls to be paid on it. When people buy products on the internet from a vendor in another country, their liability for duty may be made clear in the small type on the web page. Their payment by credit card, without accounting for duty, is received in the country of origin of the goods, which are then shipped.

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When the goods are delivered to the purchaser in this country, a claim is made by the person making the delivery or agents of the vendor to collect the duty. At that point, duty will have been paid by the importing agent of the company in the country of origin. There is no loss of revenue to the Exchequer but there is an immense problem for those making the delivery in collecting the money from the customer in the UK.

4.15 pm

The result, according to industry sources and recent reports in the industry's specialist press, is that millions of pounds of duty is not being collected by those acting on behalf of vendors overseas. Vendors' agents are having to bear that cost and are doing so in the hope that the matter can be properly resolved. The Government have been approached on that issue, I understand, and asked whether they would consider raising the threshold below which no duty is levied. There is--in my view quite rightly--resistance to raising the threshold of about £18 because a much bigger loophole could be created and a great deal of revenue and customs duty that should be collected might be forgone. The onus is therefore on them--if they will not raise the threshold and expect that money to be collected--to ensure that people who purchase goods in this country have a proper mechanism for raising and paying that money.

Dr. Stephen Ladyman (South Thanet): Will the hon. Gentleman give way?

Mr. St. Aubyn: When I have explained the new clause fully. It says that a customer could not be made to pay duty unless he was made properly and clearly aware when purchasing the product that he may be liable to do so. Companies wishing to import goods to this country would find that no one would handle such an import unless he had a counter-indemnity from the supplier saying that he would recover the duty from that supplier. The onus to make it clear to customers in this country that they may be liable for duty would therefore be put back on the supplier. That seems to be the only practicable way by which the respective obligations of the supplier and the purchaser could be enforced through legislation in this country.

If the Minister has an alternative means of tackling the mischief, the House will be keen to hear it this afternoon. If she has no alternative, will she please acknowledge that there is a real problem here? If the growth of e-commerce from one country to another is predicated on the fact that purchasers do not realise that there is a hidden charge for duty, that growth will be affected. E-commerce will get a poor reputation because customers who feel, as a matter of principle, that they should pay duties when that is asked of them and not try to evade them--as is happening in some cases--will think that they have been stung.

Someone might purchase a pack of CDs at an advertised price equivalent to £30, which is a lot less than he would pay in the shops here, only to discover, when the goods come to his door, that he is liable for another £15 of duty. Clearly he would feel that the price was not quite as advertised and that he had been led up the garden path.

Mr. Andrew Miller (Ellesmere Port and Neston): I apologise to the hon. Gentleman and the House as I have

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to go up to Committee in a moment. Specifically on CDs, how would he make the new clause work in the context of music that is delivered electronically? That method of delivery is becoming increasingly prevalent and, following mergers such as those announced in the past few days, it will become even more prevalent.

Mr. St. Aubyn: The hon. Gentleman raises a good point. There are instances in which the collection of duty will be very difficult in any event. Indeed, one can imagine someone purchasing an expensive CD piece by piece to come within the £18 threshold; no single purchase would cross that threshold, which has been around for many years. I am grateful to him for showing, in another way, how the existing legislative framework is totally inadequate. The real mischief here--the real danger--is that customers will get the intelligence that buying on the net is full of risks, one of which is that they may be stung for unexpected duty. The other risk is that those who are currently building up, in the interests of a competitive market, the business of delivering these goods from one country to another will be deterred from doing so if they find that they have a mounting problem of bad debt when they pay duty to Customs and Excise and cannot recover it from the customers at that point. There are those providing the service now who are contemplating how to protect their position. They will work out ways in which they can recover the duty.

In the end, if the problem grows to become just a little more severe than it is already--and we are all predicting a massive growth in the scale of this business--it will be the Exchequer that finds it is losing out. Therefore, it is incumbent upon the Government to accept the clause, accept that the principles behind it should be taken forward in another place and put, perhaps with better wording, into the body of the Bill. Alternatively, the Minister should assure the House that she understands the problems that are being raised this afternoon and come up with her own remedy in good time for another place to consider it.

Dr. Ladyman: If my recollection is accurate, on Second Reading the hon. Gentleman argued that the Bill was far too complicated and needed to be much simpler, just based on what is now clause 7. Can he enlighten us as to why he wants to put this horrendously complex and unworkable piece of legislation into this Bill, which is clearly the wrong Bill for it?

Mr. St. Aubyn: It has become evident to me that the growth of business-to-customer e-commerce will be jeopardised if a fundamental principle--that of showing that the taxation due on a purchase is clearly stated when someone makes the purchase--is not enforced at this stage; the entire business of e-commerce will rapidly be discredited. If we are passing a Bill making electronic signatures legal, we are presumably expecting that the quantity of this business will grow substantially. We do not want to see that business grow on a false premise that tax liabilities are not properly spelled out when such deals are confirmed.

Dr. Ladyman: I am grateful to the hon. Member for giving way again. The point of commitment, if someone is buying something from abroad, will be at the point when they place their order. I can understand how the

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hon. Gentleman could impose this restriction on British businesses selling abroad, but how could he impose it on foreign businesses that we are buying from?

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