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Mr. Ottaway: Schedule 8 relates to aggregates levy repayments and credits and the reimbursement arrangements. As the schedule is detailed, long and extensive, it would be helpful to the Committee if the Minister could briefly set out his thinking on it.
Mr. Timms: I do not have a great deal to add to what I have already said on the subject. My remarks on clause 32 apply equally to schedule 8. I do not apologise for repeatedly making the point that all these arrangements are wholly conventional and reproduce arrangements that work well elsewhere in the tax system. We need provisions on repayments. Such provisions are set out in the schedule. They work well elsewhere, and I have no doubt at all that they will work extremely well in this measure.
Mr. Letwin: I should like to begin by asking the Financial Secretary to confirm that clause 33 replicates the standard VAT provisions. I wonder whether he can give us an idea of how far the clause will apply. That is relevant in the context of the debate that we shall have on the serious matter of job exports. So far as the Government are aware, what is the structure of the industry's non-resident holdings? Are there significant non-resident holding companies with significant subsidiaries that operate or--to revert to our earlier discussion--could appear to the commissioners to be intended to operate in a taxable domain in respect of the aggregates levy?
Has the Financial Secretary discussed the European Union aspects of the clause in relation to any such non-resident holding companies and their subsidiaries? Has he received legal advice on that? Is he aware of the legal challenges to the proposal and its effects currently being contemplated and mounted by various people in the domestic industry under EU law? What advice has he had about that? It would be helpful to understand those points, which relate to clause 33, although their importance will become evident when we debate clause 48--the substantive debate that we need to have in the time remaining this evening.
Mr. Timms: Clauses 33 and 34 are technical provisions, the purpose of which, in common with the other indirect taxes, is to provide special treatment for non-resident companies to protect the Inland Revenue. The great bulk of the provisions is based on those for the landfill tax, much of which was, in turn, drawn from the arrangements for VAT, as the hon. Gentleman suggests. However, the provisions are not intended to address non-resident holding companies; they are essentially intended to deal with importers who do not have a permanent base in the United Kingdom. Air passenger duty is an example of the need for such provisions.
I do not have the information that the hon. Gentleman requests, and I have received no representations about a legal challenge. Of course, EU state aid arrangements will need to be discussed, and those discussions will take place in the usual way.
Mr. Letwin: I am grateful to the Financial Secretary for that response. I am sorry, but I seem to have misunderstood the point that he made about the purpose of the clause. Is he saying that the purpose is to catch the importer who could otherwise avoid the import form of the levy?
Mr. Letwin: That clarification is very helpful. In that case, I shall ask a question different from the one I misguidedly asked in the first place. How will non-resident holding companies with substantial subsidiaries in this country be affected? Will the domestic subsidiary simply be treated as an ordinary domestic company for the purposes of the tax?
I take it that no state aid issue will result from such parity, but does it not follow that an odd and negative state aid issue will arise in relation to an import that escapes the levy because it has been cloaked in the form of prefabricated concrete? If the same object is produced by a domestic subsidiary of a non-resident holding company, it would be subject to the levy because it is produced domestically. Has the Financial Secretary received any advice on that matter?
Mr. Timms: I have been involved in several discussions with Brussels about state aid matters, and I do not envisage any concerns being raised about the point to which the hon. Gentleman has drawn attention.
Question proposed, That the clause stand part of the Bill.
Mr. Letwin: The Committee will be grateful if the Financial Secretary can confirm that the clause will lead to the same treatment for groups as in other indirect taxation legislation, such as that for VAT.
To return to the issue of commercial exploitation, however, I persist in not understanding, among other things, how clause 19 will work from a sheer practical point of view, even if we leave aside the particular problems that would emerge from the case of Mr. Jones, about which I speculated earlier. Clause 35(2) exposes the issue beautifully and, under it, we must ask when commercial exploitation has occurred--and "when" is the
Let me consider the matter in the reverse order of logic. I persist in believing that after we have completed the tests in clause 19(3), which determine whether the exploitation is commercial and which have, according to the Minister, to be taken simultaneously, we still have to ask at what moment that exploitation occurred. For that, we must look to clause 19(1), which tells us nothing about when that might have been--perhaps it is not meant to. I remember lecturing about such "if, and only if" clauses at Cambridge. They are jolly good for some logical purposes, but are of no use for temporal purposes.
It is clear that paragraphs (a), (b), (c) and (d) of clause 19(1) are followed by an implicit "or"--indeed, paragraph (c) has an actual "or" after it. If the Minister is using the method of statutory construction in which the "and" in clause 19(3)(d) implies that paragraphs (a), (b), (c), (d) and (e) have to be taken together, then the "or" at the end of clause 19(1)(c) must imply that aggregate is exploited if it comes under paragraphs (a) or (b) or (c) or (d).
Clearly such activities could occur at different times. If the quantity of aggregate is subjected to exploitation when it is removed from a relevant site, that will not necessarily happen at the same moment as the aggregate
There might be a clear explanation of that, and it would be nice to know what it is. We have a series of tests for exploitation, none of which has anything to do with anyone's ordinary understanding of the term. In addition, they are connected with tests of commercial exploitation which have nothing to do with the understanding not just of an ordinary person, but of an extraordinary person--namely, the Minister. He thought that the crucial test is the time of the sale, but it is not.