Draft Tax Information Exchange Agreement (Taxes on Income) (Gibraltar) Order 2006


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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 Majesty’s Government. The agreement is a further demonstration of that—it 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 Gibraltar’s 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 exchanged—in this case the tax authorities—is 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 Botswana—not literally of course, although it would be considerably warmer—I 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.
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 caught—that 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 assisting—or at least not preventing—the 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 Japan’s approach to its treaty policy has changed substantially in recent years. It reflects the Japanese Government’s wider aim of opening up Japan’s 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 UK’s 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 objective—one, 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 arrangements—hon. Members asked about that in relation to Japan—are constant across all of our treaties. The Finance (No. 2) Bill arrangements give the anchor for continuing the Government’s 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 2006

Resolved,
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 2006

Resolved,
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 o’clock.
 
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