James
Brokenshire: There is a need to promote economic
competence and well-being. In a well-run country like Botswana that has
a stable Government and which encourages business growth and economic
strength, a treaty such as this will assist in that process, and that
is why I have risen to speak in support of it. The key element is to
ensure that the treaty comes into
effect as quickly as possible, and like my hon. Friend the Member for
Rayleigh I look forward to the Paymaster General confirming when that
is likely to happen, so that we can encourage and promote trade with
Botswana and support its efforts to strengthen its economy and the
well-being of the
region. 3.3
pm
Dawn
Primarolo: I shall deal briefly with each treaty in turn,
starting with the tax information agreement with Gibraltar. I can
confirm that the hon. Member for Rayleigh accurately described the
relationship between the Government of Gibraltar and Her
Majestys Government. The agreement is a further demonstration
of thatit has been sensibly negotiated and agreed, to the
benefit of both jurisdictions. The hon. Gentleman asked specifically
about the one-year phasing-in period. That came about at
Gibraltars request and I understand that there was a particular
issue about paying agents and their ability to prepare and have the
information and respond positively to the requests. In fairness, any
Government negotiating such treaties would provide for sensible
preparation. Gibraltar asked for it and we considered it entirely
appropriate. The
hon. Member for Falmouth and Camborne (Julia Goldsworthy) asked a
number of questions about the exchange of information, which we have
discussed many times in connection with both tax treaties and Finance
Bills. However, as she suggested, it is important that I should confirm
for the record that the exchange of information and what information
that should be are specified, that the use of the information is
specified and that the competent authorities between whom the
information is exchangedin this case the tax
authoritiesis specified, as is true of all our tax
treaties. The
further onward transmission of the material is tightly controlled,
requires consent and would need to be a requirement under an obligation
to respond to requests from law enforcement authorities, courts and so
on. Therefore, the information can be passed only in a specific,
accounted-for and properly scrutinised manner. It cannot be passed to
another country on a fishing trip, as it is called. We would not say,
Oh, we think you might have some information about one of our
residents who might have had some money in Gibraltar. Can you please
tell us what that is? That would be
excluded. If I may
move on to Botswananot literally of course, although it would
be considerably warmerI understand that the Botswanan
Parliament endorsed the arrangements at the end of 2005, so their
movement into law will be rapid and will take place this year. We had
hoped to make the agreement earlier, but we had only one agreement and
it is normal to have more than one to convene the House of Lords Select
Committee on the Merits of Statutory Instruments. However, that was
important, because we wanted the provisions operational by 2007, so the
remaining procedures are those that the House follows after formal
ratification. The
hon. Lady asked about the fees paid. The Botswanan Government requested
that fees paid by a resident of Botswana to a UK provider could be
taxed,
according to the arrangements, at 7.5 per cent. in Botswana.
Increasingly, it is not unusual for developing economies to make such
requests, and I am sure that one can understand why that is important
for them. However, in return Botswana was prepared to agree the changes
on withholding tax, which are incredibly important to the UK and UK
business. Although the UK would not normally agree to such arrangements
on technical fees in treaties, we would agree if the case could be made
for a developing economy, because we recognise the importance of
assisting
them. Keith
Vaz (Leicester, East) (Lab): I am sorry if I missed this
piece of information, as I had to leave the Committee briefly, but
could my right hon. Friend say how many Botswanans the order will
affect?
Dawn
Primarolo: I am afraid that I cannot. I do not know how
many Botswanans would be caughtthat would be a matter for the
Botswanan Government. My duty as a Minister is to ensure that there are
properly operating provisions in our agreements and that UK interests
are properly represented. It could be argued that, in agreeing the 7.5
per cent., that was not the case, but we felt that, as Opposition
Members mentioned, there was a wider and more important point about
assistingor at least not preventingthe developments
that the Botswanan Government wanted.
There are real improvements in
the treaty for UK residents, which equal those obtained by any of our
European competitors. I touched on them in my introduction, but as I
have said, withholding tax on dividends is important. The exemption on
interest flows to Government agencies, and a withholding limit is
important. On balance, the agreement is good for Botswana, and it will
be for the UK. As
for the questions about Japan, owing to further ratification following
the signing of the agreements, the process will take some time through
the autumn. That is because of printing, information and various other
parliamentary procedures for ourselves and Japan. Unfortunately, there
need to be certain time limits between each process, and in order to
make the treaty operational by 2007, I was keen, as were the Government
of Japan, to ensure that our respective Parliaments processed the
treaty agreements as speedily as possible.
If, for instance, we had
discussed this ratification in the autumn, we would not have had time
to complete our formal parliamentary processes or the processes outside
this House for the other parts of the treaty. We need to complete them
by 2007, and we did not want to put that at risk. Does the hon. Member
for Rayleigh want to respond?
Mr.
Francois: No. That is fair.
Dawn
Primarolo: On the question of why Japan wanted a new
treaty, apart from the fact that it was an old treaty, it is no
surprise to hear that Japans approach to its treaty policy has
changed substantially in recent years. It reflects the Japanese
Governments wider aim of opening up Japans economy.
There are measures in the treaty that provide for it. It is a shift in
Japanese intent, which is fine for the UK. I am sure that we all
welcome that. It is a substantial economy, and it is important that it
plays its part in the world economy.
The hon.
Member for Rayleigh asked about the anti-avoidance measures. The
UKs anti-avoidance measures are in the schedule to the Japan
order. The Japanese Government wanted additional arrangements, and they
are modelled on the arrangements between the UK and the US, which have
been in operation for about three years. They have not caused us any
problems, but we continue to use a particular means of delivering what
we consider to be anti-abuse measures to stop treaty shopping, which is
part of the OECD model. We find that there are two ways of delivering
the same objectiveone, with which Japan is more comfortable and
another which is our normal process. That is why the anti-avoidance
measures are in the schedule.
The exchange of information
arrangementshon. Members asked about that in relation to
Japanare constant across all of our treaties. The Finance (No.
2) Bill arrangements give the anchor for continuing the
Governments policy of extending the exchange of information,
because it is the simplest, most direct and most transparent way of
establishing whether a citizen should be taxed here on income that has
not been taxed elsewhere in the world, and of ensuring that we avoid
double taxation. With those remarks, I commend the orders to the
Committee and hope that they will endorse
them. Question put
and agreed
to. Resolved, That
the Committee has considered the draft Tax Information Exchange
Agreement (Taxes on Income) (Gibraltar) Order
2006. Draft
Double Taxation Relief (Taxes on Income) (Botswana) Order
2006Resolved,
That the Committee has
considered the Draft Double Taxation Relief (Taxes on Income)
(Botswana) Order 2006.[Dawn
Primarolo.] Draft
Double Taxation Relief (Taxes on Income) (Japan) Order
2006Resolved,
That the Committee has
considered the draft Double Taxation Relief (Taxes on Income) (Japan)
Order 2006 .[Dawn
Primarolo.] Committee
rose at fifteen minutes past Three
oclock.
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