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Mr. Mark Field (Cities of London and Westminster) (Con): I hope that I will not detain the House for too longI note with some approval that my right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth) and my hon. Friend the Member for Stone (Mr. Cash) are not present tonight.
Conservative Members accept that the motions would normally be subject to scrutiny via the statutory instrument procedure, but the relevant Committees have not been composed. Time is tightnot in relation to this particular debate, although I hope that we will conclude well before the 90-minute limitbecause, as the Financial Secretary has rightly pointed out, the agreements must be signed, ratified and have taken effect in the relevant territories before 1 July. With the ECOFIN meeting on 7 June, it is prudent to ask us tonight to move ahead in that way.
As the Financial Secretary pointed out, the information exchange route has been supported by both sides of the House as a means of avoiding the need for a withholding tax. We want to maintain that light-touch approach. Although we would generally prefer full scrutiny of such agreements in Committee, it is right to acknowledge that the wording of the draft agreements is the same as that of those that the House ratified in March for three other dependent territories, namely the Crown dependencies of Jersey, Guernsey and the Isle of Man. Accordingly, we are happy to express our support.
Mr. Quentin Davies (Grantham and Stamford) (Con): I join my hon. Friend the Member for Cities of London and Westminster (Mr. Field) in congratulating the Financial Secretary on his promotion. I also congratulate my hon. Friend on his nomination to the Front Bench.
I wish to place it on record that, despite all the work on and good intentions in agreements such as those that have been reached between the European Union and the four territories, they will not be effective. People who are intent on evading tax will continue to do that by one of two simple expedients. First, they could move their funds out of the territories in the knowledge that the regime will change. Is it part of the agreement that the authorities in the territories inform the EU or the tax authorities in EU countries of whether existing deposit holders there, who are believed to be resident in the EU, now move their funds out? Will the Inland Revenue or any such authority in the EU know about that? It is the obvious response of someone who is determined to continue to avoid or evade tax.
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I suggested the second response in my earlier intervention. People will simply say that they are not resident in the EU. I presume that, in cases of doubt, depositors will now be asked whether they are resident in the EU. It is clearly a question that expects the answer "no" in the case of people who are determined to avoid tax in the EU. They will simply register their residence in some territoryperhaps Outer Mongoliathat does not have an agreement with the EU. There is no danger of credit risk to the depositor in doing that because the funds will remain in a particular bank in a specific territory. It is possible for depositors to examine their accounts and talk to their fund managers on the spot so no one will know whether they are resident in, for example, Outer Mongolia or Somalia. They may transfer their funds into some Liechtenstein Anstalt or a similar corporate vehicle, which will then be the deposit holder and resident outside the EU.
Chris Huhne (Eastleigh) (LD): If the hon. Member for Grantham and Stamford (Mr. Davies) considers some of the territories where he suggested that there was no serious credit risk, he would realise that he would perhaps breach Financial Services Authority rules if he advised any of his constituents to go there.
Mr. Davies: The hon. Gentleman completely misunderstood the point of my comments. No credit risk is established by claiming that one is resident in Somalia or Outer Mongolia, but depositing one's money there might entail considerable credit risk. However, one does not need to do that. One could keep the money in the Cayman Islands or the Netherlands Antilles and simply claim that one is resident in Ulan Bator.
Chris Huhne: The hon. Gentleman perhaps anticipates my remarks a little. The agreements that refer to the territories that we are discussing are frankly a sideshow. I happened to be in the European Parliament when they came through. They were a price that several Ministers paid to get agreement on the more substantive measure and overall taxation agreement. Although it was a necessary price, and some problems that the hon. Gentleman described might arise, the territories do not compete with the major financial centres in the EU because of the extra credit risk that one would undertake if one decided to put all one's cash in the Cayman Islands rather than London, Paris or Frankfurt.
The real point about the information exchange agreementwe very much support itis not, frankly, the sideshow issues of these rather insignificant territories, but the much more significant failure of the major countries of the Organisation for Economic Co-operation and Development so far to achieve a real agreement on information exchange. The United States Internal Revenue Service, for example, has been extremely successful in persuading the Swiss banks to give it information about American residents who have
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deposits with the Swiss banks, mainly by applying pressure on those banks through their subsidiaries in New York city.
Through such heavy breathing, as it were, the Americans have been extremely effective in ensuring de facto information exchange between Switzerland and the US tax authorities. That is unfortunately not the case with the United Kingdom or with other EU countries, and I very much hope that the Minister can tell us whether a little progress has been made in extending the impact of these tax information exchange agreements not to places such as the Netherlands Antilles, but to the real centres, in which there is a major problem.
Mr. Gummer: Does the hon. Gentleman agree that in the light of the issues that he raises, we should ask the Minister whether information could be made available to the House at the end of the first year showing whether the £60 million figure had been met? This is a complicated and expensive undertaking, and most of us would like to know whether the facts after the event are anything like those before it. If such information were provided, we would all be much happier.
Chris Huhne: I am very grateful to the right hon. Gentleman for that intervention, not least because I know of no instance when my party has been against the publication of, or transparency of, financial or other information. The provision of such information by the Treasury would certainly be a step forward.
In broadly welcoming this approach, I ask the Minister to respond not only to the points that I have raised but to that raised by my hon. Friend the Member for St. Ives (Andrew George). In fact, he did not ask the Minister how many people were likely to be brought within the curtilageI believe that he used that splendid phraseof this regulation; rather, he asked how many people were likely to be taxpayers in those territories. That information is not given in the explanatory memorandum and I would not expect the Minister to have it at his fingertips, but perhaps he could inform my hon. Friend in due course about the number of potential taxpayers who will be affected by the agreements before the House.
Perhaps I should start where we finished and welcome the hon. Member for Eastleigh (Chris Huhne) to this House and to the Liberal Democrat Front Bench. It is clear that he will bring to bear on our proceedings his experience in the European Parliament.
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You cautioned him, Madam Deputy Speaker, and he certainly did range rather more widely than the limited terms of the orders before us. I am sure that we will have a chance to deal with those issues in a future debate, and I look forward to doing so.
I should say in passing to the hon. Member for Grantham and Stamford (Mr. Davies) that he has a pointup to a point. It is clear that the agreements relating to the four territories and the legislation to ratify them, which we are considering tonight, are a step towards dealing with the problem of systematic tax evasion. They are not the complete answer and they can be undermined and avoided, as is often the case with anti-avoidance and anti-evasion measures. I simply say that it was not clear precisely what the hon. Gentleman was arguing. He seemed to be either arguing in favour of a withholding tax or a heavier-duty measure to deal with the problem, or offering a counsel of despair. That seemed to suggest that there was little that we could do or should try to do in response to these problems, which I simply do not accept.
In response to the hon. Member for Cities of London and Westminster (Mr. Field), I appreciate his acknowledgement of the importance of these measures, particularly his acknowledgement of the rather unorthodox way in which we have brought them to the Floor of the House rather than to the Merits Committee upstairs. In doing so, we have put the UK in the best possible position to continue the leadership that we have displayed from the outset in getting the exchange of information agreements in place. They number nearly 250, and the four that we are ratifying this evening are important contributions. The House, in approving these orders tonight, will play a small but important part in ensuring that the exchange of information to implement the EU savings directive can come into effect, as intended, on 1 July this year.
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