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
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
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.
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.”
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
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.
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.
Resolved,
That
the Committee has considered the draft International Tax Enforcement
(Antigua and Barbuda) Order
2011.
Resolved,
That
the Committee has considered the draft International Mutual
Administrative Assistance in Tax Matters Order
2011. —(Mr
Gauke.)
Resolved,
That
the Committee has considered the draft Double Taxation Relief and
International Tax Enforcement (Montserrat) Order 2011.
—(Mr
Gauke.)
Resolved,
That
the Committee has considered the draft International Tax Enforcement
(Saint Vincent and the Grenadines) Order 2011.
—(Mr
Gauke.)
Resolved,
That
the Committee has considered the draft International Tax Enforcement
(Saint Lucia) Order 2011.—(Mr
Gauke.)
Resolved,
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.
