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Mr. St. Aubyn: I hope that I shall be forgiven if I did not explain the issue clearly enough. It is, I admit, by a backdoor route and by a transfer of responsibility; nevertheless, if the clause became law the onus on the vendor's agents would rapidly be transferred back on to the vendor himself or herself in the country of origin of the goods, because no one would be prepared to take goods into this country on behalf of a foreign supplier and find that they could not then collect the duty from the purchaser in this country. They would tell the vendor, "I must have a counter-indemnity for this." Otherwise, they would be very foolish. At that point the vendor would find, even though not subject to UK law, that it is very much in their interests to make sure that they properly display the liability to Customs and other levies in this country for goods purchased here. Otherwise, they will find that they, via their UK agents, become liable for the loss of revenue incurred from the failure to make clear to customers in this country a warning of what their liability will be.

Mr. Richard Allan (Sheffield, Hallam): I have some sympathy with the hon. Gentleman's intention, which is to promote electronic commerce. But I am concerned that he is just talking about goods exchanged through electronic communications. Is he proposing a different regime for when, for example, I contract to buy a book from than if I write off to a bookseller in New York and ask it to send me books? Is he suggesting that electronic communications should be treated differently from the other trade, which is already going on and growing as a natural feature of the globalisation of trade?

Mr. St. Aubyn: So far as I am aware, there are no duties and levies on books, because we do not believe--at least, in our party and, I believe, in the Labour party; perhaps the Liberals are different these days--in a tax on learning. The awareness of internet trade means, of course, that the growth of conventional trade is brought along behind it, with the wind in its sails.

People who opt for conventional methods of purchase from other parts of the world--because of the less convenient means of purchase--will presumably do so because they are aware of the existence of the new clause. If it brings about an awareness of liability to tax, which is what we want it to do, it will have done its job.

Mr. John Bercow (Buckingham): My hon. Friend is making a powerful argument. Is not the purpose of the new clause to avoid stealth taxes, and is it not that fact that has raised the hackles of the hon. Member for South Thanet (Dr. Ladyman)?

Mr. St. Aubyn: As always, my hon. Friend has introduced an entirely new dimension to the debate. I think that, in this instance, the customs duty that the authorities seek to collect from the purchaser in this country could be described as another stealth tax.

If the Bill is enacted without the protection of new clause 3 or a similar provision with the same good intention, many people in this country may conclude that

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the problem with buying through the internet is that the buyer is caught by a stealth tax. In this case the stealth tax is a customs duty, but time and again we see that international vendors do not make clear on the web page the liability of the customers in this country whom they are asking to buy from them.

Given the technology that is available nowadays, it would be very simple to display a warning sign conveying to customers whose purchases amount to more than £18, or 28 ecu, that they will be liable for a tax. In fact, it would not be all that difficult for vendors to include a calculation of the tax: it would be good customer service, although the new clause does not require it. The law should not be too specific, and I know that we are all keen for the Bill to be technology-neutral, but citizens of this country have a fundamental right to be aware of the taxes for which they are liable.

Passing a burden or liability on to the vendor's agents deals with the need for the vendor to display the message. In other instances in which business is done outside this country--there are instances in income and capital gains tax legislation--United Kingdom agents of overseas operators are made liable for taxation. I think the Minister, as a former Treasury Minister, will confirm that UK agents collecting rent for overseas property owners whose property is in this country may be made liable for the tax on that rent if it is not otherwise collected.

Under this and earlier Governments, we have already endorsed the clear principle that agents of overseas operators may be made liable, in the full expectation that they will then require a counter-indemnity from their overseas counter party. We have enabled our legislation to extend further than United Kingdom citizens when the actions of overseas agents and operators affect those citizens. I am sure that Labour Members who speak today will confirm that they too are concerned about the mischief that the new clause seeks to correct. They may feel that it contains imperfections, and I would be the first to admit, as a Back Bencher without the departmental resources that the Minister has to hand, that it could be improved; but I ask them, as I have asked the Minister, to recognise the existence of that mischief and the need to deal with it before we spur the growth of this market--which the Bill will do--on the false premise that people can be sold goods without being shown the tax for which they are liable.

4.30 pm

Mr. Duncan: The House should be grateful to my hon. Friend the Member for Guildford (Mr. St. Aubyn) for moving the new clause because it highlights an area of growing complication. The hon. Members for Ellesmere Port and Neston (Mr. Miller) and for South Thanet (Dr. Ladyman) have compared physical delivery of a product with what can now happen over the internet: supply of goods--perhaps sound or data--that have a commercial value, but are not wrapped or posted and so do not go through or over a border that is policed normally. Furthermore, the growth of the internet will lead to many more cross-border purchases between an individual and a company, as distinct from an individual buying from a local company that itself will enter a cross-border transaction.

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The new clause is essentially an attempt to introduce some consumer protection into e-commerce. Domestically, we either have an all-inclusive price--a price plus VAT--or a price saying that VAT has to be added. In commercial practice throughout the world--for example, well-established habits in shipping--something is sold either free on board, or with carriage, insurance and freight all to be paid for. Now we see the rise of a different category of trade that will not have the same clarity as conventional patterns of trade. Cross-border pricing habits and the contractual terms that govern them will not have the openness and clarity of traditional patterns.

Therefore, the new clause is an attempt to introduce some clarity into e-commerce for the protection of the consumer. It calls for the consumer to be given the whole picture, wherever possible, before he is asked to enter a contract.

Given the issues that I have explained, I ask the Minister to explain what her policy is in those difficult areas. I have broad sympathy with her as she tries to unravel the problem and to get to grips with it. None the less, the new clause highlights the problem and presents to the Minister a call for a clear explanation, so that I, the House and consumers will know where they stand in law.

The Minister for Small Business and E-Commerce (Ms Patricia Hewitt): I was surprised to hear the explanation by the hon. Member for Guildford (Mr. St. Aubyn) of the new clause. I had thought that Conservative Members were against imposing new burdens on business, but the new clause would impose appalling burdens on British business, without securing any significant gains for British consumers.

The new clause deals with who should be responsible for knowing what taxes are due in cross border e-commerce trade. The problem is that, in addition to imposing burdens on British companies that want to use electronic commerce to export their products and services, the new clause would severely damage the chances of achieving our objective of making the UK the best place in the world for commerce.

As has been pointed out, the new clause discriminates against electronic commerce because it requires a vendor to disclose the purchaser's liability for tax before a contract is finalised and, if that is not done, the vendor or his agent to become liable for any undisclosed taxes. Even if that principle were sound--it goes too far--surely it should apply to all business, not only to business that is contracted through the medium of an electronic communication.

The Bill seeks to get rid of barriers in existing law that discriminate against new technologies. We are not trying to impose new barriers that will inhibit the growth of electronic commerce.

Mr. St. Aubyn: Why is it such a huge burden on a vendor who uses the electronic medium to ensure that, when someone buys something, a message splashes up on the screen saying, "Do you realise that you are liable for customs duty on this purchase? Please click on the box yes or no before you proceed." With electronic commerce, that is a light burden for any vendor. It is precisely why

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it is appropriate for the new clause to apply to electronic commerce. It would be harder to ensure that that sequence of questions was asked in a more conventional format.

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