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Schedule 38
Mr. Flight: I beg to move amendment No. 23, in page 475, line 11, after "his", insert "alleged".
The Second Deputy Chairman of Ways and Means (Sir Michael Lord): With this it will be convenient to discuss the following amendments: No. 35, in page 475, line 27, at end insert—
'6A Nothing in this Schedule shall contravene the presumptions in law against retrospection whether statutory or otherwise.'.
No. 24, in page 475, line 28, leave out paragraph 6.
Mr. Flight: The notes accompanying the Bill provide an innocuous description of clause 131 and schedule 38, saying that they
- "improve existing arrangements for cross-border assistance between EU Member States in recovering indirect taxes, duties and penalties, and extend recovery procedures to cover direct taxes (income tax, corporation tax, capital gains tax"
What the clause and schedule actually do is implement Council Directive 2001/44/EC, and provide a mechanism for its operation. They provide an automatic enforcement in the United Kingdom of any tax claimed in another EU member state against a UK party, without that UK party's being able to dispute the claim in the United Kingdom. The goods can be seized—it has to go through the standard channel—but the company or individual cannot question the amount or the circumstances of the claim.
Schedule 38 provides for the proceedings by the relevant UK authority to enforce the foreign claim by way of legal proceedings, through distress or otherwise, as for a corresponding UK claim. Unlike a claim by Customs and Excise or the Inland Revenue, however, such a claim will not involve any ability to question the claim: that is ruled out by paragraph 6(b). Similarly, paragraph 4(1) refers to "his liability", not to a claimed or alleged liability. An assumption of guilt is being introduced into the system of enforcement in the UK.
We consider that unacceptable. For one thing, there are major differences between the UK's tax law and that of other EU states, and between the tax laws of other EU states. Britain has what I would call the Magna Carta tradition. We may complain about the length of Finance Bills, but the law in the UK and the United States goes to great lengths to distinguish what is within the law and what is without, what is legal and what is illegal, what is avoidance and what is evasion.
In most EU states, there is no difference between those pairs of concepts. In other words, tax law is not clear. It is often ultimately political, and can be extremely arbitrary. For example, if the tax authority of another EU country—Greece, let us say—produced a trumped-up tax charge against a British company or citizen because it, or he, had a business or a property there, it would simply have to put the claim through its system, which does not involve the same abilities to dispute as ours, and then present it to the British tax authorities, saying, "Go get that money." The British company or citizen would be banned from disputing the claim in the British courts or with the commissioners for taxes. As I have said, an assumption of guilt is written into the Bill. That is why
amendment No. 23 would insert the word "alleged" before the word "liability". Amendment No. 24 would remove paragraph 6—the key paragraph—which prevents the UK party from challenging the otherwise automatic enforcement of the tax claim by the UK authorities.Amendment No. 35 deals with the fact that the UK has a six-year back period for revenue claims, a three-year back period for customs claims, and a 20-year back period for revenue claims involving fraud. The provisions in schedule 38 include no such parallel time limits, yet circumstances could arise in which a claim was automatically enforced in the UK that related to an alleged tax claim from, say, 30 years ago. Under the provisions, the date will depend on the rules of the other member state. Of course, application for UK enforcement cannot not be made until the Bill is enacted. Once enacted, the proceedings in the other member state must apply within five years of coming to the UK to enforce the claim. That is what the five-year limit means. However, such proceedings could relate to a time period and a claim that go back substantially further than that, depending on the prevailing rules and customs of the country in question.
British citizens enjoy the law and rules relating to back claims as they obtain in this country, but under the Bill back claims arising in an EU member state could be enforced, and property seized, without any right to dispute. Moreover, such claims could relate to a period some 30 years ago. That seems somewhat objectionable. That rather contravenes the principles of UK statute and case law, concerning the extent to which claims can be made and enforced retrospectively.
I do not want to single out poor old Greece yet again, but the extraordinary recent plane spotters case highlights the fact that the legal arrangements in some other states are rather more arbitrary and political than in this country. In mentioning Greece, I am mindful of the famous Don Pacifico incident. Lord Palmerston would turn in his grave if he realised what the Bill proposes to write into our laws.
What is hidden away in schedule 38 is objectionable and authoritarian, and contrary to the traditions of British civil liberty. It is wholly wrong to allow a tax claim by a foreign country to be enforced in Britain without giving the person claimed against the legal ability to dispute. Moreover, the potential exists to go back much further than in the case of a UK claim. In terms of the EU directive that the schedule will incorporate in law, I should point out to the Economic Secretary that the schedule in part involves an element of gold plating. I also understand that the parliamentary draftsmen had believed that the word "claim", and the five-year arrangements, referred to the year in which the UK claim was alleged to have been made, effectively limiting retrospection to five years, but that is not reflected in the directive. The directive is also fairly woolly and unclear, but it has been put into effect in the schedule in the way that I have described.
Given the time of day, we do not seek to divide the Committee on all three amendments, but I give notice that we shall seek to do so on amendment No. 24.
7.30 pm
Mr. Edward Davey (Kingston and Surbiton): The thrust of the schedule is probably right, in the sense that the mutual assistance recovery directive is important for the British taxpayer. We need to ensure that citizens from
other EU member states who owe the UK Exchequer money are not able to avoid that debt to the British people by moving to other EU member states. Indeed, such a debt might have been accrued by a UK citizen, but we do not want people to be able to avoid their due tax liabilities to the UK Exchequer by moving to other member states of the EU. To that extent, the directive is correct and the legislation appropriate.In order for the Committee to be assured that the Exchequer will be protected, we need to know from the Minister how many other EU member states have enacted the directive. If she cannot tell us that all the other member states have enacted it, we need to know when she expects that to happen. We do not want to be the only member state to comply with the directive and our partner states to catch up with us in 10 or 15 years' time. That would mean that the legislation would give the UK Exchequer no advantage, and in fact would put it at a potential disadvantage.
Mr. Bercow:: We are hearing an extraordinarily unbalanced speech by the hon. Gentleman.
Mr. Davey: I have not finished yet.
Mr. Bercow: I hope that we will hear more and that it will be better than what we have already heard. The hon. Gentleman, as a member of the Liberal Democrat party, which professes a belief in individual rights, is preoccupying himself with the protection of the Exchequer. Is he not concerned about schedule 38(6)(b) and the denial of individual rights that it entails?
Mr. Davey: The hon. Gentleman should stay in his place and let other hon. Members finish their speeches. There are two aspects to the schedule, one of which is the protection of the UK Exchequer. That is the one that I was addressing because I wished to seek assurances from the Minister that other EU member states are enacting the directive so that the UK Exchequer is protected. That is an important point. Indeed, I was surprised that the hon. Member for Arundel and South Downs (Mr. Flight) failed to make that point. We need to ensure that the UK taxpayer is protected and I am surprised that the hon. Member for Buckingham (Mr. Bercow) is so concerned that I am concerned about that. That makes the Tory attitude to financial improvements evident to everybody.
Mr. Davey: If the hon. Gentleman will stay in his place, I am about to come to the issue of the rights of the individual. He is right to say that schedule 38(6)(b) is a matter for concern. We want to know what protection UK citizens will have if the tax authority of another EU member state makes a false claim. The directive, and the way in which it is being put into our law, does not give adequate protection. I hope that the Minister will make it clear to the Committee that she has been reassured that it will not be possible for a UK citizen to be pursued by another EU member state's tax authority on no grounds. We need to hear from the Minister what rights of appeal UK citizens would have. For example, if they believed that the highest court of another EU member state had not given justice, would they be able to go to the European Court of Justice to override the decision?
I hope that the Minister can reassure the House that important individual rights are not being overridden.
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