The Financial Secretary to the Treasury (Mr. Stephen Timms): I beg to move,

The Chairman: With this it will be convenient to consider the draft Double Taxation Relief and International Tax Enforcement (Jersey) Order 2009 and the draft Double Taxation Relief and International Tax Enforcement (Virgin Islands) Order 2009.

Mr. Timms: May I start by giving you a warm welcome to the Chair of our Committee, Mr. Atkinson? I hope that you have had a restful and recuperative summer break. I also welcome all members of the Committee.

The orders deal with new or amended tax agreements with Jersey, Guernsey and the British Virgin Islands. Their main focus is on raising the exchange of information for tax purposes to internationally endorsed standards, and they also include provisions for the avoidance of double taxation. The agreement with the British Virgin Islands was signed on 29 October last year. We signed the agreement with Guernsey this January and with Jersey in March.

Before I introduce the orders in more detail, I ask the Committee to consider the debate in the context of the remarkable progress that has taken place this year on a new international consensus on tax information exchange. It all began in the run-up to the G20 London summit in April. A number of countries with a long tradition of secrecy, including Switzerland, Liechtenstein and Singapore, have now committed to tax transparency and to the OECD standard on information exchange. That has been an important breakthrough. The OECD standard is now accepted internationally.

In the last year, more than 70 tax information exchange agreements and more than 50 new tax treaties or protocols to existing treaties incorporating the standard have been negotiated around the world—more than the number in the whole of the previous 10 years put together. At the London summit, the G20 took note of an OECD list showing which jurisdictions met and which did not meet the international tax standard.

Daniel Kawczynski (Shrewsbury and Atcham) (Con): The Minister mentioned Liechtenstein. There have been reports in the British press that the person who leaked the information was paid by the British Government for that information. Will the Minister confirm that that was not the case? It would be regrettable if we were paying for stolen goods.

Mr. Timms: I have seen press reports suggesting that a large sum of money was paid by the German tax authorities to the individual in question. I cannot comment on arrangements with Her Majesty’s Revenue and Customs, but I can tell the hon. Gentleman that nothing like the sum that is reputed to have been paid by the German authorities would have been considered by the UK.

At the more recent summit in Pittsburgh, the G20 confirmed that it stands ready to deploy sanctions against any jurisdiction that has not met the standard by next March. As a direct result, many jurisdictions that had previously held out against full co-operation with other countries on tax are now signing tax information exchange agreements. We have signed about 12 since April, and there are more to come.

We have seen the expansion and reform of the global forum on tax transparency. The forum has set up a robust peer review process that will take place over the next three years to ensure that all the jurisdictions that have signed up are complying with their commitments and putting into full effect the information exchange agreements they have entered into. Those assessments will be published so that everyone can monitor progress.

Jersey, Guernsey and the British Virgin Islands have been leaders in the move towards greater transparency. They were among the first low-tax jurisdictions to commit to the international standard. They all signed agreements with the UK before April, which was before the G20 summit, and have signed many more agreements with other OECD countries since then. All three are now recognised by the OECD as having substantially implemented the standard.

Each draft order consists of an agreement in two parts. The agreements with Jersey and Guernsey provide for tax information exchange and amendments to our existing double taxation arrangements with the islands. In the case of the British Virgin Islands, the agreement provides for tax information exchange and a double taxation agreement restricted to individuals. That is an unusual double taxation agreement, given that the BVI does not levy taxes on total income or capital gains, but only levies a payroll tax, so the agreement is limited, incorporating only some of the provisions of the OECD model tax convention on income and capital. Specifically, it provides limited tax benefits for pensioners, students and apprentices, and Government servants.

The agreements are welcome and I commend them to the Committee.

Mr. David Gauke (South-West Hertfordshire) (Con): For those of us, including the Minister and me, who served under you during the Finance Bill, Mr. Atkinson, it is a great pleasure to be back in similar circumstances.

I thank the Minister for his explanation of the orders. At the risk of ruining the suspense that sometimes exists in such Committee sittings, we welcome the orders and the new treaties. We shall not be voting against them later this afternoon. I also thank the Minister for access to his officials, to discuss the detailed content of the orders. As ever, it was extremely helpful—I thank the officials for their briefing.

As the Minister said, there has been increased focus on offshore financial centres—tax havens—in recent months, not least on some of the Crown dependencies and the jurisdictions that we are debating today. Both Jersey and Guernsey dispute their characterisation as tax havens, but for the purposes of the Committee the term serves as helpful shorthand.

We welcome the new tax information exchange agreements that apply for Jersey and Guernsey. Existing tax information exchange agreements existed with both, but previously the obligation on the states was not to provide information that the authorities already had, whereas the new agreements mean that the authorities will be required to obtain information. That will be relevant in a number of banking matters and the ownership of companies, and it should prove very helpful to HMRC. Will the Minister say a word or two about the use of nominees, with regard to the ownership of companies, and to what extent it will be possible for the relevant authorities to get back to the beneficial owners of companies? Will that information be available?

In the context of our previous arrangements with regard to Jersey and Guernsey, will the Minister say a word or two about the previous performance of those states in providing information? Was the experience a happy one? Were there difficulties in meeting the threshold to obtain information from those states, or did things work well?

I understand that for some time the United States has had agreements similar to those that we are debating today—I think one has been in place with Jersey since 2000. The Minister might want to say a word or two about the US experience of a broader tax information exchange agreement, and about the level of assistance provided by the Guernsey and Jersey authorities.

Again with regard to Guernsey and Jersey, I raise the matter of article 7(1)(c), which states that the authorities—Guernsey and Jersey, not the United Kingdom—may decline to assist when the disclosure

Does the Minister regard that as an element of possible concern? I understand that there are no bank secrecy rules as such in those jurisdictions, but is there worry that the public policy caveat might prove difficult?

The Minister rightly said that those jurisdictions have been at the forefront when entering into tax information exchange agreements and complying with international obligations. Will he say something about their performance regarding anti-money laundering procedures? The recent International Monetary Fund study showed that Jersey has complied with 44 out of 49 of its recommendations in such matters, which exceeded the United Kingdom’s record of 36 out of 49. Will the right hon. Gentleman explain how the UK views the performance of the jurisdictions in that matter?

Returning to tax information exchange agreements, the Minister and I have debated previous orders relating to the likes of the Isle of Man and Bermuda. Will he update the Committee on what progress has been made with those tax information exchange agreements? How effective are they? Have the new and improved agreements proved of some benefit to the Exchequer, as we hope will be the case with the agreements before the Committee?

It is customary to ask the following question and for the Minister customarily to find it difficult to answer: what is likely to be the benefit to the Exchequer? I appreciate that it is difficult to assess the benefit as a consequence of such agreements, but I should be interested to know whether the Treasury has made an assessment of the overall cost to the Exchequer of the activities of tax havens. The figure of £18.5 billion was quoted in some reports. It was included in a “Panorama” programme earlier this year. Does the Minister believe that the figure is accurate?

The Chairman: Order. I am reluctant to narrow the debate, but I remind the hon. Gentleman and the Committee that we are debating three orders relating to Jersey, Guernsey and the Virgin Islands. He is going rather wide of the debate.

Mr. Gauke: Thank you, Mr. Atkinson. I was about to move on. I was addressing the potential revenue that is lost through tax havens, a concern that we all share. We are debating three offshore financial centres and I wanted merely to ask whether the Treasury has an overall view about the cost to the Exchequer of such action.

Mr. Jeremy Browne (Taunton) (LD): Given that the hon. Gentleman shares the concern of all Committee members about revenue not being paid in taxation by people in tax havens, will he say whether his party would ever accept money from anyone who used those tax advantages?

The Chairman: Order.

Mr. Gauke: I will abide by your judgment, Mr. Atkinson.

I turn briefly to the timing of the agreements. The US has had an enhanced tax information exchange agreement with Jersey and Guernsey for some time. Why is that happening only now with the UK? What are the reasons behind the delay, if there is a delay? When will the agreement come into force? I know that it is dependent on legislation in both jurisdictions, but can the Minister inform the Committee where we are with all the various parties to the agreements?

As the Minister said, the BVI does not have an income tax as such, so the benefit of any double taxation treatment will go to the BVI rather than to the UK. That is not necessarily a bad deal, because no doubt the UK will benefit from the tax information exchange agreement. Can the Minister outline to the Committee the potential cost to the UK with regard to the various matters that he mentioned—pensions, students and Government services? I do not imagine that the cost will be particularly significant but any guidance he can provide in that context will be helpful.

Finally, the Minister mentioned that there has been considerable progress on tax information exchange in recent months, and I appreciate that there will be many more double taxation agreements and tax information exchange agreements before us in the months ahead. Some are of a fairly standard and non-controversial nature, but I understand that there can often be delays in getting parliamentary time to enable us to debate orders that require an affirmative procedure. On behalf of the official Opposition, may I tell the Minister that we appreciate the importance of the agreements? We are prepared to be flexible on the numbers of such agreements that we take at any one time in order to expedite the measures. They are helpful. The greater exchange of information between tax authorities is welcome, so I put on the record an offer to the Minister that we would be sympathetic to proposals he may have to ensure that we obtain parliamentary time to debate the orders in an expeditious manner.