Session 2010-11
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General Committee Debates
Delegated Legislation Committee Debates

Draft International Tax Enforcement Orders 2011 (Antigua and Barbuda, Saint Vincent and the Grenadines, Saint Lucia, and Saint Christopher (Saint Kitts) and Nevis)
Draft International Mutual Administrative Assistance in Tax
Matters Order 2011
Draft Double Taxation Relief and International Tax Enforcement (Monserrat) Order 2011

The Committee consisted of the following Members:

Chair: Mr Mike Weir 

Beresford, Sir Paul (Mole Valley) (Con) 

Bingham, Andrew (High Peak) (Con) 

Brown, Lyn (West Ham) (Lab) 

Clappison, Mr James (Hertsmere) (Con) 

Crockart, Mike (Edinburgh West) (LD) 

Flynn, Paul (Newport West) (Lab) 

Gauke, Mr David (Exchequer Secretary to the Treasury)  

Goodwill, Mr Robert (Scarborough and Whitby) (Con) 

Hanson, Mr David (Delyn) (Lab) 

Harris, Mr Tom (Glasgow South) (Lab) 

Hopkins, Kelvin (Luton North) (Lab) 

Maynard, Paul (Blackpool North and Cleveleys) (Con) 

Norman, Jesse (Hereford and South Herefordshire) (Con) 

Roy, Lindsay (Glenrothes) (Lab) 

Tredinnick, David (Bosworth) (Con) 

Watson, Mr Tom (West Bromwich East) (Lab) 

Williams, Stephen (Bristol West) (LD) 

Wilson, Sammy (East Antrim) (DUP) 

Alison Groves, Committee Clerk

† attended the Committee

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Seventh Delegated Legislation Committee 

Wednesday 9 March 2011  

[Mr Mike Weir in the Chair] 

Draft International Tax Enforcement (Antigua and Barbuda) Order 2011 

2.30 pm 

The Exchequer Secretary to the Treasury (Mr David Gauke):  I beg to move, 

That the Committee has considered the draft International Tax Enforcement (Antigua and Barbuda) Order 2011. 

The Chair:  With this it will be convenient to consider the draft International Mutual Administrative Assistance in Tax Matters Order 2011, the draft Double Taxation Relief and International Tax Enforcement (Montserrat) Order 2011, the draft International Tax Enforcement (Saint Vincent and the Grenadines) Order 2011, the draft International Tax Enforcement (Saint Lucia) Order 2011 and the draft International Tax Enforcement (Saint Christopher (Saint Kitts) and Nevis) Order 2011. 

Mr Gauke:  It is a pleasure to serve under your chairmanship once again, Mr Weir. 

The draft orders deal with changes to the 1947 double taxation arrangement with Montserrat, four tax information exchange agreements—with Antigua and Barbuda, Saint Kitts and Nevis, Saint Lucia, and Saint Vincent and the Grenadines—and a protocol amending the joint Council of Europe and OECD multilateral convention on mutual administrative assistance in tax matters. 

All but one of the agreements were signed under the previous Government and form part of the considerable legacy of signed agreements that this Government inherited. We were able to discuss a number of the agreements in a series of three debates last November. I am pleased to introduce a further tranche of draft orders to the Committee today. 

Anticipating a likely remark by the right hon. Member for Delyn, I fully accept that there is still a little more to do before we clear the backlog we inherited. He and I had a lively debate on the point in the Third Delegated Legislation Committee last week. Finding space for such debates in the busy parliamentary schedule is not easy, but we are making good progress. The Government expect shortly to lay before the House draft orders relating to the remaining five tax treaties signed by the previous Government. We will bring them to a Committee for debate as soon as possible after the Easter recess. 

With your permission, Mr Weir, I shall speak first about the Montserrat order, which amends the 1947 double taxation arrangement with Montserrat, one of the UK’s oldest DTAs. The order updates the exchange of information provisions, to bring them into line with current OECD standards. 

The order also contains updated provisions on pensions taxation. Under the existing arrangement, double taxation relief on cross-border payments of pension income is

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limited to the amount that is subject to tax in Montserrat, which can create disincentives to return home for Montserratians who left the island following the volcanic eruptions in the late 1990s and who settled in the UK. Such treatment is also out of line with the usual approach that the UK adopts in its DTAs. Finally, we have added a mutual agreement procedure to allow consultation on the interpretation and application of the arrangement. 

I will not dwell long on the tax information exchange agreements, because the House has discussed and approved many such in the recent past. TIEAs, as they are known, provide tax authorities with the information that they need to assess and enforce the taxes covered by the agreement. They are thus an important tool in combating cross-border avoidance and evasion. 

The four TIEAs are all similar, in that they follow closely the OECD model agreement on exchange of information on tax matters, and provide for comprehensive exchange of information, to OECD and international tax standards in respect of taxes of every kind and description. 

Finally, I will say a few words about the protocol. The draft order amends the convention on mutual administrative assistance in tax matters, which the UK ratified in 2008. The convention is a multilateral treaty providing a legal framework to facilitate international co-operation on tax matters. It was, however, drafted before the adoption of the internationally agreed standard on exchange of information. Therefore, the sponsoring organisations, the OECD and the Council of Europe, decided to draw up a protocol to the convention, bringing it into line with the international standard. 

Previously, the convention was only open to signature by member countries of the OECD or the Council of Europe. In a world in which there is a need and desire to accelerate the completion of a global network of exchange of information arrangements, it was helpful to have a multilateral instrument that could achieve that. Accordingly, the protocol provides that, in future, non-OECD and Council of Europe states will be able to sign up, subject to the approval of the existing parties to the convention. 

The Government welcome the development, in particular because it could enable developing countries to obtain the benefits of the new tax transparency environment. I am also encouraged by the number of OECD and Council of Europe states that have already signed the protocol. The protocol was opened for signature last May, and has been signed by 18 countries already, including the United Kingdom. It will enter into force three months after the fifth instrument of ratification has been deposited. I understand that Denmark, Finland, Georgia, Norway and Slovenia have ratified the protocol, and have deposited—or are about to deposit—their instruments of ratification. 

The Committee may like to know that the communiqué issued by G20 Finance Ministers after their recent meeting in Paris encouraged all jurisdictions to consider signing the amended convention, and we can expect to see further progress in the near future. In conclusion, I commend the orders to the Committee, and I am happy to answer any questions that right hon. or hon. Members may have. 

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2.35 pm 

Mr David Hanson (Delyn) (Lab):  It is a pleasure to serve under your chairmanship for the second Wednesday afternoon in a row, Mr Weir. It feels like groundhog day because the Minister and I have considered several of these orders over the past few weeks and months. He will know that we welcome the orders and support their implementation. They advance a trend that commenced under my right hon. Friend the Member for Edinburgh South West (Mr Darling) under the previous Government. 

I welcome the tax information exchange agreements with St Vincent and the Grenadines, Antigua and Barbuda, Montserrat, St Kitts and Nevis and St Lucia. I also welcome the International Mutual Administrative Assistance in Tax Matters Order 2011. As agreed by the usual channels, we will not oppose the orders, but as ever, I would like to ask the Minister a couple of questions. 

First, each order comes into force at a date when the mutual parties have notified each other of the completion of their necessary internal procedures. For example, in the order concerning Antigua and Barbuda, article 12 indicates that the provision will come into effect when those parties have notified each other. Each order has a different article for entry into effect, but the principle is the same. Will the Minister indicate where we are with ratification and parliamentary procedures, not in this House but in each of the territories that the Committee is discussing today? When does he expect the orders not only to have been completed by the House but to be in force and operable for each territory? 

Secondly, will the Minister indicate what the anticipated tax income will be for the UK Government from the undertakings in the orders? Perhaps he could give an assessment for the next 12 months. In the past, figures have shown that we anticipated that around £12 billion of extra revenue would be collected because of approaches towards tax avoidance taken by the previous Government. That is obviously a small but significant contribution to tax-tightening measures aimed at preventing avoidance. Has the Treasury made any assessment of the figures that are likely to accrue to it because of the orders before us today? 

The Minister has helpfully answered the question that he knew I would ask—I have asked it on every occasion—about how many measures are outstanding and when that is likely to be sorted. I welcome that. 

My other point relates to the protocol on the European Union convention, which is also before the Committee today. I have received representations noting some concerns about the UK signing up, particularly to the assistance and recovery of tax debts as part of the convention. Those representations—which I do not say I agree with—stated that there may be some concerns about the robustness of some of the signatory countries and their ability to pursue that level of tax debt. Has the Minister received similar representations, and does he have any view on that? They came from the Institute of Chartered Accountants in England and Wales. Its tax faculty said that it was concerned about 

“the UK signing up in particular to the ‘assistance in the recovery of tax debts’ part of the convention as we were not sure that some signatory countries would have robust means of determining the amount of a tax debt which they might subsequently ask the UK for assistance in pursuing.” 

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Is the Minister aware of those representations? If so, does he have any comments? I am not in a position to make a judgment, but as those comments have been made, I think it would be in order for the Minister, if he has the opportunity, to comment on them. With those few comments and questions, I will support the proposals before the Committee. 

2.40 pm 

Kelvin Hopkins (Luton North) (Lab):  I have a number of constituents from most, if not all, of the islands. Certainly we have active associations from St Kitts and Nevis and from St Vincent and the Grenadines. I also have personal friends from those areas. Indeed, our local mayor two years ago was from St Vincent, so we have great and close relations. 

I endorse everything that my right hon. Friend the Member for Delyn has said and will be happy to support the Government’s actions. I just wonder whether an assessment has been made regarding whether, if tax avoidance and evasion is taking place, it is significant. I assume that my constituents would be perfectly happy with the legislation—it is perfectly fair to make sure that people pay their taxes wherever. I just wonder whether the Minister has made any assessment on what reaction there might be among the communities to the orders. 

2.41 pm 

Mr Gauke:  I welcome the support from the right hon. Member for Delyn and the hon. Member for Luton North for the orders. This is an area where there has been cross-party consensus. As the right hon. Gentleman and I both pointed out, a number of agreements were signed by the previous Government with our support in opposition. Several equivalent orders were debated in the previous Parliament, and I remember being in the right hon. Gentleman’s current position, asking questions similar to the ones that he has asked me, and I will try to answer them. 

First, regarding ratification in other countries—obviously we know where we are here in the UK—we have received formal confirmation by diplomatic note that both Antigua and Barbuda, and St Kitts have completed the procedures required to give effect to the agreements. Montserrat has also enacted the necessary primary legislation needed to give effect to our new exchange of information arrangements, and we expect to receive its formal confirmation of the completion of the procedures soon, so we should be in a position to move quickly. 

Mr Hanson:  Does the Minister have any anticipation of the date on which the orders will be in force? We have had ratification information from the respective territorial Parliaments, but what date does he expect them to be in force? 

Mr Gauke:  We anticipate that that will be next month. They will come into force in April. I hope that that provides the right hon. Gentleman with a useful clarification. 

The right hon. Gentleman asked how much extra revenue we hope to get. When I was sitting in his seat, I asked that question a number of times to the right hon. Member for East Ham (Stephen Timms), whose answers

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to me were similar to the ones that I will give, which is that it is not possible to accurately measure the revenue effects of the agreements. However, over time, we anticipate that taken as a whole, without necessarily identifying particular agreements, the movement towards greater information exchange and the signing of such agreements could have a significant effect. That would clearly be helpful, but it is not possible at this point to identify a specific sum that will result. 

Mr Hanson:  Will the Minister commit to report collectively on the amounts that are raised from the agreements on an annual basis? That could be done by a Parliamentary question from myself, but I think, in the interest of transparency and openness, it might help if we had some clarity on those issues. 

Mr Gauke:  We are always keen to be as transparent as possible in this area, as elsewhere, but it is quite difficult to specifically identify the information that might come to light, because there are quite sophisticated behavioural effects. It involves not only identifying the sums that may be obtained as a direct consequence of information being exchanged between the UK and another country; there is also a behavioural effect, a deterrent effect, and so on. So it is quite difficult to do, although I know that HMRC would be keen to share as much information as possible. It produces a number of documents annually setting out the progress made on tax enforcement. I am sure it will identify specific information to the extent that it is possible and appropriate, but at a practical level it is difficult to be too precise. 

The right hon. Gentleman also raised the issue of the representations from the ICAEW. On the potential concern that some of the tax enforcement authorities may not have the capability to properly assist in the recovery of debt, concerns were raised on this specific point when the UK signed the convention in 2008. HMRC’s experience is that assistance in recovery is working satisfactorily; there have been no problems with vexatious or inappropriate requests from other countries, and we are satisfied with the actions taken by other tax authorities in those cases where agreements have been signed and come into force. 

The hon. Member for Luton North welcomed action to tackle tax evasion and avoidance, as he frequently does. The counterparties to these agreements were pleased to enter into them—they did so voluntarily, and I think that that has been widely welcomed. We are pleased with the progress made in this area and will continue to do what we can to ensure greater openness and transparency.

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It is clearly in our interests that we can take steps to ensure that the correct amount of tax is paid. I am pleased that the Committee supports that. 

I hope that is helpful to the Committee and, subject to any further comments, I hope that the orders will have its support. 

Question put and agreed to.  


That the Committee has considered the draft International Tax Enforcement (Antigua and Barbuda) Order 2011. 



That the Committee has considered the draft International Mutual Administrative Assistance in Tax Matters Order 2011. —(Mr Gauke.)  



That the Committee has considered the draft Double Taxation Relief and International Tax Enforcement (Montserrat) Order 2011. —(Mr Gauke.)  



That the Committee has considered the draft International Tax Enforcement (Saint Vincent and the Grenadines) Order 2011. —(Mr Gauke.)  



That the Committee has considered the draft International Tax Enforcement (Saint Lucia) Order 2011.—(Mr Gauke.)  



That the Committee has considered the draft international Tax Enforcement (Saint Christopher (Saint Kitts) and Nevis) Order 2011. —(Mr Gauke.)  

2.48 pm 

Committee rose.