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Session 2001- 02
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Delegated Legislation Committee Debates

Draft Double Taxation Relief (Taxes on Income) (Lithuania) and (The Hashemite Kingdom of Jordon) Order 2001

Second Standing Committee

on Delegated Legislation

Monday 26 November 2001

[Mr. James Cran in the Chair]

Draft Double Taxation Relief (Taxes on Income) (Lithuania) Order 2001

4.30 pm

The Paymaster General (Dawn Primarolo): I beg to move,

    That the Committee has considered the draft Double Taxation Relief (Taxes on Income) (Lithuania) Order 2001.

The Chairman: With this it will be convenient to consider the draft Double Taxation Relief (Taxes on Income) (The Hashemite Kingdom of Jordan) Order 2001.

Dawn Primarolo: I welcome you to the Chair, Mr. Cran.

Both orders deal with a new comprehensive double taxation convention. The business community welcomes double taxation treaties as an aid to international trade and investment. Their main aim is to relieve double taxation where income from one country goes to a resident of another country and is taxed in both countries. Each country agrees to limit its taxing rights and to give credit for the other country's tax. Tax treaties also help business to plan its investments by providing certainty about tax treatment. They also provide for exchange of information between the two tax authorities and for consultation between those authorities to try to resolve difficult cases by mutual agreement.

We are committed to maintaining and developing the UK's network of double taxation treaties. We recognise the importance of such treaties, as did the previous Government, and have more than 100 bilateral tax treaties, which is one of the largest networks of double taxation treaties in the world. We will shortly begin our annual consultation round in which we invite all interested parties to let us know about their priorities for new and updated treaties. We will take their views into account when we plan our future programme.

The new convention with the Hashemite Kingdom of Jordan was signed on behalf of the Government by my hon. Friend Ben Bradshaw, the Under-Secretary of State for Foreign and Commonwealth Affairs, during his visit to Jordan in July 2001. That is the UK's first comprehensive double taxation convention with Jordan, and covers all categories of income and gains. The previous agreement, from 1978, was limited to shipping and air transport profits. It may be surprising that we have not had a comprehensive convention before, given the close ties of friendship that have always existed between the two countries, and our important trading and investment links. The UK's exports to Jordan were worth £131 million in 2000, and had increased by 30 per cent. by the end of August 2001. Our principal exports include telecommunications equipment, medicines and pharmaceuticals, industrial machinery, transport and power-generating equipment, and consultancy services.

More than 40 British consultancies are working on major projects in water and energy services, hospitals, transportation, telecommunications and management consultancies. Major British investors in Jordan include RMC Group, which is one of the largest producers of cement in the world, Cable and Wireless, and Alpha Catering, which is the first major investor in the Jordanian privatisation programme.

I am pleased that we are making the worthwhile extension of our treaty network, and I am confident that, for many years, the convention will provide a framework in which trade and investment between the UK and Jordan can continue to flourish. The convention covers income such as property rents, business profits, international transport, dividends, interest, royalties, capital gains, employment income, pensions and annuities, and follows the principles that are enshrined in the model double taxation convention developed by the Organisation for Economic Co-operation and Development. The terms that we have secured are at least as good as those that Jordan agreed with our competitors.

The convention with Lithuania was signed on behalf of the Government by my hon. Friend Brian Wilson, the then Minister of State, Foreign and Commonwealth Office, during his visit in March. Since Lithuania regained independence in 1991, relations between our countries have remained close. Lithuania's significance is greater than its size would suggest. Lithuania is the largest of the three Baltic states. It signed an association agreement with the European Union in 1995, and negotiations for EU membership began in March 2000. We look forward to welcoming Lithuania into the EU, and I need hardly stress the importance of double taxation treaties with our European and prospective European partners.

During the 1990s, Lithuania transformed its economy to one based on free market principles. UK exports to Lithuania rose to £134 million in 2000, making the UK the third largest exporter. Our exports include textiles, leather, petroleum, industrial machinery and road vehicles. Lithuanian exports to the United Kingdom totalled £256 million in 2000 and included metal ores and scrap, clothing, textiles, petroleum products, fertilisers, iron and steel. The UK is Lithuania's most significant trading partner outside the Baltic region.

The convention with Lithuania, as with Jordan, covers types of income such as property rents, business profits, international transport, dividends, interest, royalties, capital gains, employment income, pensions and annuities. It also follows OECD principles and the terms are at least as good as those agreed by Lithuania with our competitors.

I am confident that the treaties will be welcomed by British business, and will aid competitiveness and stimulate greater investment and trade between the UK and Jordan and between the UK and Lithuania. I commend the draft orders to the Committee, and I am happy to respond to any questions.

4.37 pm

Mr. Peter Luff (Mid-Worcestershire): It is a great pleasure to welcome you to the Chair, Mr. Cran. In the past, I have served under your authority in several capacities but never under your chairmanship, and it is a great privilege to do so now.

I apologise that my hon. Friend the Member for Christchurch (Mr. Chope) is detained: he is moving amendments to legislation on the Floor of the House of Commons. I thank the Minister for moving these two orders so ably, even if she did not allow her hon. Friends the Members for Exeter (Mr. Bradshaw) and for Cunninghame, North (Mr. Wilson) to hide behind their proper anonymity, or at least their geographical identity. I am glad that she paid implicit tribute to the work of the previous Government on this subject, and I was glad to hear of her commitment to the maintenance of the UK's network of such treaties.

However, where will future competences for such treaties lie? I understand from my hon. Friend the Member for Christchurch that the European Commission is seeking to gain competence and negotiate future treaties on behalf of the UK and other members of the European Union, including Lithuania. I join the Minister in welcoming its future membership of the EU. I hope that the UK Government, whatever colour their flag may be, will bring such treaties before the House of Commons and not leave others to do it for them.

4.38 pm

Brian Cotter (Weston-super-Mare): I also welcome the Minister's explanation of the orders, which was typically succinct and—something that the Minister will be delighted to hear—business friendly. The Government always say that they are, and I know that business will welcome the initiative. Certainty is also of great importance to business. We welcome the establishment of even better relations with the two countries.

I have never been a person to pinch the punch line from the other party. However, Conservatives—and occasionally myself—usually mention red tape. I am sure that the Minister will assure us that no red tape will be involved, and therefore, we welcome the initiative.

4.39 pm

Dawn Primarolo: I assure the hon. Member for Mid-Worcestershire (Mr. Luff) that double taxations are bilaterally agreed between countries, and that that is the continued mechanism through which the treaties are agreed. There is no question of competence lying elsewhere. We have double taxation treaties with other European countries, which are current European Union members, and such treaties are the best way to make arrangements between countries.

That matter leads me to red tape, which the hon. Member for Weston-super-Mare (Brian Cotter) mentioned. Double taxation treaties are designed to address problems that can emerge from negotiations in the absence of such a treaty. Such problems occur when two different countries press a company for the payment of tax. As I have said, where difficulties arise that are not foreseen and must be settled quickly and bilaterally, the treaty provides to allow that to take place. Double taxation treaties are facilitating; they remove barriers and give certainty to business to allow the planning of future investment. I am sure that the hon. Gentleman will closely follow double taxation treaties and ensure that there is a consistent and clear theme: we want to allow competition, ensure that both parties receive the correct amount of tax and allow business to develop and plan.

I hope that the Committee will consider that the two treaties provide an excellent start for the blossoming of relationships with Jordan and Lithuania, and will not hesitate to agree to them.

Question put and agreed to.


    That the Committee has considered the draft Double Taxation Relief (Taxes on Income) (Lithuania) Order 2001.



    That the Committee has considered the draft Double Taxation Relief (Taxes on Income) (The Hashemite Kingdom of Jordan) Order 2001.—[Dawn Primarolo.]

        Committee rose at eighteen minutes to Five o'clock.

The following Members attended the Committee:
Cran, Mr. James (Chairman)
Baron, Mr.
Beard, Mr.
Cotter, Brian
Crausby, Mr.
Jackson, Helen
King, Andy
Luff, Mr.
Pearson, Mr.
Plaskitt, Mr.
Pond, Mr.
Primarolo, Dawn
Sarwar, Mr.


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Prepared 26 November 2001