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Session 1999-2000
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Standing Committee Debates
Finance Bill

Finance Bill

Standing Committee H

Tuesday 20 June 2000

(Morning)

[Mr. Frank Cook in the Chair]

Finance Bill

(Except clauses 1, 12, 30, 31, 59, 102 and 113)

10.30 am

Mr. Graham Allen (Nottingham, North): I beg to move,

    That the Committee, at its rising on Tuesday 20th June, do adjourn till Thursday 22nd June at One o'clock.

The sittings motion has been tabled merely to accommodate Treasury parliamentary questions in the House on Thursday. For the convenience of members of the Committee, we shall meet from 1 o'clock until 3.30 pm, adjourn for a break and return at 4.30 pm.

Question put and agreed to.

Schedule 30

DOUBLE TAXATION RELIEF

Amendment proposed: No. 369, in page 505, line 26, leave out ` ``subsections'' substitute ``subsection'' ' and insert

    ` ``subsections shall be treated as inserted after that subsection'' substitute ``subsection shall be treated as inserted after subsection (2) of section 794'' '.—[Dawn Primarolo.]

Mr. Oliver Letwin (West Dorset): I do not take deep issue with the amendment, but it should not have been on the selection list for discussion this morning, nor should the subsequent amendments. We should have been debating the details of the all-important changes to double taxation relief that we shall discuss later in our proceedings in the schedule stand part debate. However, such matters have been remitted to a later date. That is wholly unfair and we hope that, when we reach the stand part debate, the Paymaster General will give us a clear exposition of what is in the Government's mind, so that we can approach the matter with vigour.

Apart from one or two minor points, we do not have great objections to the amendments. Indeed, on the whole we welcome them. We want to proceed at a brisk pace to allow the Committee to have maximum time for a structured but detailed debate on schedule 30 itself.

Mr. Nick St. Aubyn (Guildford): I support my hon. Friend. Along with many Back-Bench members of the Committee, I have barely had a chance to study the Government amendments to the schedule. The Government have said that they will have to revise the schedule on Report, so why are they trying to steamroller through the amendments today? Would it not have been better to defer consideration of the schedule until they had got their act together, before the matter was discussed on Report?

Mr. David Heathcoat-Amory (Wells): I support my hon. Friends, and their call for the issue to be withdrawn for further consultation and discussion, so that more time can be taken to put together a proper package. We have recently been expected to digest many technical amendments. We know from earlier efforts by the Government to legislate in such a complex area that they have got it wrong. They have not understood it, but they have blundered ahead in the face of outside criticism. They could well be doing the same with the amendments, which have not been properly exposed to the accountancy profession. It is not in good order for the Committee to proceed with detailed consideration of a complex matter. We hope to discuss the principle of the changes when we debate whether the schedule be included in the Bill, if you will allow us, Mr. Cook. However, before the Government amendments are debated or accepted, it would be in order for the Government to apologise for their treatment of the business community.

My hon. Friend the Member for West Dorset (Mr. Letwin) and I raised the issue during the week that followed the Budget on 21 March, and were told that there had been consultation on the package of reforms. It turned out that the Inland Revenue had consulted on a different set of proposals. The business world thought that it had reached an accommodation with the Inland Revenue, but the Treasury overturned that and brought in a separate and radical set of proposals governing the control of foreign companies and double taxation relief. We then heard that the proposals had been made in the Treasury by a political adviser who clearly had more enthusiasm than sense.

The Treasury made that ignorance worse by compounding it with a refusal to admit that a mistake had been made. Ignorance turned into arrogance. The Confederation of British Industry, the Institute of Directors and the major accountancy firms said that the Government were making a mistake. On Second Reading, the Chief Secretary to the Treasury went so far as to say:

    The changes have been widely welcomed.—[Official Report, 17 April 2000; Vol. 348, c.719.]

That was flatly untrue. He was asked by whom, and the only group that he could come up with was Labour Back Benchers. That is not Government consultation; it is government by decree. Finally, the Government have admitted that they made a mistake.

As well as apologising generally, they ought to apologise for insulting Mr. Peter Wyman, a distinguished accountant who will be president of my professional body, the Institute of Chartered Accountants. The Chief Secretary sought to dismiss his concerns and gratuitously suggested that he was a former tax adviser to Neil Hamilton. The truth is that Mr. Wyman voluntarily gave his time in the deregulation task force set up by the previous Government. It would be a courtesy if the Paymaster General apologised on behalf of her right hon. Friend and the Government for the way in which they handled the entire matter, before we came to technical consideration of the matters before the Committee.

The Paymaster General (Dawn Primarolo): It sounds as though it is going to be a long day. I sincerely hope that all hon. Gentlemen who speak in Committee today will remember to declare their interests, so that we are aware at all times where their interests lie.

I shall respond to the points made by the hon. Member for West Dorset about the drafting change in amendment No. 369. I concur with his view about the need for a substantive debate—[Interruption.]

The Chairman: Order. I sense a change in atmosphere today, for which I am not ready. If the sotto voce asides transmitted across the Room continue, I shall be less than pleased. We must pay attention to the points at hand. I have been tolerant so far, but the discussion has been well removed from the amendment. I am anxious to remove any resentment that may have arisen over the weekend. Let us cut out the nonsense and get on with the business in hand.

Dawn Primarolo: The hon. Member for West Dorset asked you to look favourably on a schedule stand part debate, Mr. Cook. I concur with his views, as I know that Opposition Members want to make several points about a particular aspect of the schedule.

I should like to put the debate back in focus. Two years ago, on Budget day, the Chancellor announced an Inland Revenue review of double taxation relief for companies. As a result of that review, companies made representations about several aspects. All the amendments relate to those representations. I shall put aside the use of offshore mixer companies, as that will form a substantive part of the discussion of the hon. Member for West Dorset in the schedule stand part debate.

The amendments deal with several issues. With the exception of offshore mixing, the schedule deals with precisely the issues with which companies said during the consultation—which went very well—that they wanted us to deal. Consultation has continued since the publication of the Bill, and the amendments represent the helpful and constructive comments made about the technical detail of the wording of the schedule—excluding offshore mixing, which is slightly more contentious.

Amendment No. 369 simply corrects a cross-reference from the Income and Corporation Taxes Act 1988 to the proposed provision. I am grateful to those who suggested this straightforward correction to a highly complex schedule. I do not believe that any further explanation is necessary, and I hope that the Committee will agree to the amendment.

Mr. Howard Flight (Arundel and South Downs): How the Paymaster General describes amendment No. 369—as correcting a drafting error—is not how the board of Inland Revenue briefing note describes it. Is she muddling it with amendment No. 370, or is the briefing note on Government amendment No. 369 misworded?

Dawn Primarolo: I cannot answer that question. Amendment No. 369 relates to schedule 19 to the Income and Corporation Taxes Act 1988, some of the provisions of which are being retained. The amendment corrects a cross-reference from that Act to the proposed provision. As the hon. Gentleman will find, Government amendment No. 370 is also a drafting correction, which may be how confusion has arisen.

Mr. Flight: Does the amendment introduce a change? The note states that it extends credit relief for foreign tax to all businesses outside the United Kingdom with branches or agencies in the UK.

Dawn Primarolo: It will not change the meaning of the provision to which the hon. Gentleman refers. It merely corrects a drafting error. I shall try to take this as slowly as I can so that I can keep up with the complexity. I know that the hon. Gentlemen have several questions. However, the amendment does not change the meaning but merely corrects a cross-reference; the paragraph is as it was intended to be.

Amendment agreed to.

Amendment made: No. 370, in page 505, line 34, after `793' insert

    `of the Taxes Act 1988'.—[Dawn Primarolo.]

Amendment proposed: 371, in page 506, line 4, leave out `This paragraph has' and insert

    `Subsections (1) and (2) of the section inserted by sub-paragraph (1) have'.—[Dawn Primarolo.]

The Chairman: With this it will be convenient to discuss Government amendment No. 372.

10.45 am

Mr. Letwin: I do not want to dwell long on the amendments. It is clearly right that, when tax treaties do not provide for reliefs that we want companies to be able to go on claiming, there should be some provision for unilateral relief. I believe that that is the welcome effect of the amendments. However, the amendment does not cure the entire problem and a further amendment may be needed on Report. If not, the problem may be discussed again next year or the one after, because it will not occur immediately but over a period of time. Tax rules do not change in the United Kingdom alone. Other jurisdictions, alas, also have democracies, Parliaments and Governments.

 
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