Standing Committee H
Tuesday 27 June 2000
[Dr. Michael Clark in the Chair]
(Except clauses 1, 12, 30, 31, 59, 102 and 113)
INFORMATION ABOUT INTEREST ETC PAID, CREDITED OR RECEIVED
Amendment proposed [this day]: No. 457, in page 106 line 34, at end insert
`in respect of persons resident in territories specifically designated in regulations issued by the Board pursuant to subsection (5) of that section.
(1A) The Board may not designate a territory under regulations issued as mentioned in subsection (1) above unless—
(a) that territory has entered into arrangements for the exchange of equivalent information with the United Kingdom authorities; and
(b) there is evidence that interest payable in that territory is receivable by or on behalf of a substantial number of persons resident in the United Kingdom—[Mr. Letwin]
Question again proposed, That the amendment be made.
The Chairman: I remind the Committee that with this we are discussing amendments Nos. 458, in page 107, line 9, after `(b)', insert
`following paragraph (d) there shall be inserted—
``(e) that, in respect of information concerning persons who are not resident in the United Kingdom, a prescribed intermediary acting on behalf of such persons may submit an aggregate return as to the amounts of interest received by or on behalf of all such persons for whom he acts, without disclosing the identities of each individual person;''.'.
No. 460, in page 108, line 17, at end insert—
The Paymaster General (Dawn Primarolo): I spoke at some length before lunch, answering the points of principle raised by the amendment. Given my assurances, I conclude by asking the hon. Member for West Dorset (Mr. Letwin) to consider withdrawing the amendment,
Mr. Oliver Letwin (West Dorset): Despite the good will engendered by your presence, Dr. Clark, and despite the fact that we have enjoyed a pleasant lunch break, I am bound to say that the Paymaster General has not answered the major point of principle, although she has answered some of the minor ones—those that are less important in my mind than the great overwhelming issue.
I restate that point of principle. We fear that when it comes to it, the European Union may be preparing itself—and Ministers may be preparing themselves to allow the EU—to implement the provisions on exchange of information within the EU, notwithstanding the fact that other jurisdictions, may not wish to sign up to the exchange of information provisions. Within those jurisdictions, major issuing houses operate that could be the centres for issuing such things as eurobonds.
If the EU were to go forward with its provision for exchange of information, which is reflected in the Bill's provisions, without bringing in at least the United States and perhaps dependent territories and other places, business would remove itself from London on a large scale, exactly as would have occurred, albeit at a slightly lower rate, under the withholding tax provisions that Chancellor has so valiantly fought to remove. It would be a hollow victory.
The Paymaster General adverted for a moment to that line of reasoning when she drew the Committee's attention to the sequence of events that is meant to occur before the EU's exchange of information provisions are fully implemented. I am bound to say that the hon. Lady did not tell us whether she could guarantee, by whatever means are necessary, including the use of the veto, that the Government would prevent the adoption by the EU of the exchange of information arrangements unless and until other countries outside the EU that are major issuing jurisdictions had also signed on.
If we can be clear on that, we shall be perfectly willing to let go of an amendment that, as I said this morning, is neither sufficient nor necessary; and we would not then have a major problem with the way in which the Government are proceeding with the banks and the City. We accept what she said in her rejoinder. We accept that much discussion is going on in good faith between the Government, the British Bankers Association and others. The problem is not about domestic implementation but about whether our financial services industry will be irreparably harmed or, as we hope, protected by implementation as a whole.
Dawn Primarolo: To be kind to the hon. Gentleman—without endangering his political career, I hope—his amendments do not deal with the issue. I have dealt with the amendments.
Mr. Letwin: I think that I delicately accepted that point when I said that the amendments were neither sufficient nor necessary. They are a vehicle for raising a critical issue of national importance.
Dawn Primarolo: The hon. Gentleman is attempting to use the amendments as a vehicle for a discussion on the European Council's conclusions on tax matters, but the Committee is not the place in which to have such a discussion. The Prime Minister made a statement on the issue to the House. The measures on exchange of information, to which the clause and the hon. Gentleman's amendments refer, are intended specifically to enable the Government to advance their strategy for tackling tax evasion and, in particular, cross-border tax evasion. As I have said on several occasions, the Government wish to be able to do that. However, that wish must be balanced by consideration of the international competitiveness of the City of London. The question certainly does not refer simply to competitiveness in the European Union; one must consider logically where substantial amounts of financial services are provided.
If I may beg your indulgence, Dr. Clark, I will try to answer the question put by the hon. Member for West Dorset. The conclusions of the European Council were that member states would decide by unanimity whether to adopt the draft directive on exchange of information only when sufficient reassurances were received from third countries, including Switzerland. A parallel process was started. The Prime Minister said to the House on 21 June:
One of the most important aspects of the agreement that was secured is that we are pursuing, in parallel, exchange of information at an international level with countries such as the United States and Switzerland.—[Official Report, 21 June 2000; Vol. 352, c. 344.]
I have also spelt out to the hon. Gentleman the importance of reciprocity, of confidentiality for taxpayers and of the administrative arrangements negotiated between the Government and the City for the regulations. I gave the hon. Gentleman a clear answer on the issues that he raised. Given that discussions continue, that is a clear indication of the Government's intention. I hope that that response satisfies him.
Mr. Letwin: As usual, the Paymaster General puts her points beautifully, but I am afraid that the evasion here is not tax evasion but the evasion of a simple question. [Laughter.] I have to say that the joke was not as funny as my hon. Friend the Member for Arundel and South Downs (Mr. Flight) imagined.
We can handle this in 30 seconds. I repeat the question, to which I hope that the answer is yes. That one crystalline term is all that the Paymaster General needs to say. If the other member states want to implement the EU-wide exchange of information provisions without first obtaining an agreement to sign up from at least the United States and Switzerland, will the Government resist that intention by any means necessary, including use of the veto, or by voting against the proposal if unanimity is required to carry it?
Dawn Primarolo: It seems that Opposition Members have only one deployment for what I was about to call negotiation, but which for them is not that; their approach is always to say no and demand that we play the veto. Had we pursued that line, as they pressured and encouraged us to do in the past two years, we would not have achieved our current success; the withholding tax has not merely been defeated once but is off the agenda. The hon. Gentleman knows that the question of the withholding tax was discussed before and that the Conservative Government did not veto its introduction. They voted for it.
I have explained the clear principles on which the Government will judge the outcome of negotiations: sufficient reassurances, reciprocity, exchange of information and its provision under clear principles, and the requirement for unanimity in any vote on the directive that subsequently comes before the Finance Ministers. At that stage, the Chancellor would decide how to vote to achieve the twin objectives of tackling tax evasion but preserving and protecting the competitiveness of the City of London.
In all honesty, that is the only rational answer to this complex problem.
Mr. Letwin: I agree with the Paymaster General that you have been very indulgent, Dr. Clark. I do not intend to prolong the proceedings other than to say that that was a splendid example of not quite answering the question. We shall pursue the matter, which is of central importance. I am as yet unpersuaded about the Government's intentions and those of the European Union and I suspect that the Government are unpersuaded, too. The beginnings of a major problem can be seen.
The clause is merely a tiny piece in a jigsaw, however, and we do not want to press the amendments to a vote. I therefore beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.