The
Committee consisted of the following
Members:
Chairman:
Mr.
Peter Atkinson
Abbott,
Ms Diane
(Hackney, North and Stoke Newington)
(Lab)
Browne,
Mr. Jeremy
(Taunton)
(LD)
Cable,
Dr. Vincent
(Twickenham)
(LD)
Chapman,
Ben
(Wirral, South)
(Lab)
Duddridge,
James
(Rochford and Southend, East)
(Con)
Fallon,
Mr. Michael
(Sevenoaks)
(Con)
Gauke,
Mr. David
(South-West Hertfordshire)
(Con)
Kawczynski,
Daniel
(Shrewsbury and Atcham)
(Con)
McCarthy,
Kerry
(Bristol, East)
(Lab)
McCartney,
Mr. Ian
(Makerfield)
(Lab)
McGovern,
Mr. Jim
(Dundee, West)
(Lab)
Moffatt,
Laura
(Crawley)
(Lab)
Smith,
Jacqui
(Redditch)
(Lab)
Stewart,
Ian
(Eccles) (Lab)
Timms,
Mr. Stephen
(Financial Secretary to the
Treasury)Yeo,
Mr. Tim
(South Suffolk)
(Con)
David Weir, Committee
Clerk
attended the
Committee
The following also attended,
pursuant to Standing Order No.
118(2):
Newmark,
Mr. Brooks
(Braintree)
(Con)
Third
Delegated Legislation
Committee
Monday 19
October
2009
[Mr.
Peter Atkinson in the
Chair]
Draft
Double Taxation Relief and International Tax Enforcement (Guernsey)
Order
2009
4.30
pm
The
Financial Secretary to the Treasury (Mr. Stephen
Timms): I beg to move,
That the
Committee has considered the draft Double Taxation Relief and
International Tax Enforcement (Guernsey) Order
2009.
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 worldmore 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 Majestys
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.
4.36
pm
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 helpfulI thank the officials for their
briefing.
As the
Minister said, there has been increased focus on offshore financial
centrestax havensin 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 todayI 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 authoritiesGuernsey and Jersey,
not the United Kingdommay decline to assist when the
disclosure
would be
contrary to public
policy.
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 Kingdoms 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?
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 mentionedpensions,
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.
4.47
pm