Draft International Tax Enforcement (Liberia) Order, Draft International Tax Enforcement (Aruba) Order 2011, Draft International Tax Enforcement (Curaçao, Sint Maarten and BES Islands) Order 2011, Draft Double Taxation Relief and International Tax Enforcement (South Africa) Order 2011, Draft Double Taxation Relief and International Tax Enforcement (Mauritius) Order 2011.
The Committee consisted of the following Members:
† Bebb, Guto (Aberconwy) (Con)
Cunningham, Mr Jim (Coventry South) (Lab)
† Dobson, Frank (Holborn and St Pancras) (Lab)
† Drax, Richard (South Dorset) (Con)
† Gauke, Mr David (Exchequer Secretary to the Treasury)
† Goodwill, Mr Robert (Scarborough and Whitby) (Con)
† Hames, Duncan (Chippenham) (LD)
† Hanson, Mr David (Delyn) (Lab)
† Hemming, John (Birmingham, Yardley) (LD)
† Jackson, Glenda (Hampstead and Kilburn) (Lab)
† Liddell-Grainger, Mr Ian (Bridgwater and West Somerset) (Con)
† McPartland, Stephen (Stevenage) (Con)
† McClymont, Gregg (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)
† Mosley, Stephen (City of Chester) (Con)
Raynsford, Mr Nick (Greenwich and Woolwich) (Lab)
Sheerman, Mr Barry (Huddersfield) (Lab/Co-op)
† Wheeler, Heather (South Derbyshire) (Con)
Wilson, Sammy (East Antrim) (DUP)
Mr James Rhys, Committee Clerk
† attended the Committee
Fourth Delegated Legislation Committee
Tuesday 12 July 2011
[Mr Mike Weir in the Chair]
Draft International Tax Enforcement (Liberia) Order 2011
10.30 am
The Exchequer Secretary to the Treasury (Mr David Gauke): I beg to move,
That the Committee has considered the draft International Tax Enforcement (Liberia) Order 2011.
The Chair: With this it will be convenient to consider the draft International Tax Enforcement (Aruba) Order 2011, the draft International Tax Enforcement (Curaçao, Sint Maarten and BES Islands) Order 2011, the draft Double Taxation Relief and International Tax Enforcement (South Africa) Order 2011 and the draft Double Taxation Relief and International Tax Enforcement (Mauritius) Order 2011.
Mr Gauke: It is a pleasure to serve under your chairmanship, Mr Weir.
These taxation orders deal with protocols to the UK’s double taxation conventions with South Africa and Mauritius, and tax information exchange agreements with Liberia, Aruba and the territories composing the former Netherlands Antilles.
With your permission, Mr Weir, I will speak first about the order relating to South Africa. The protocol makes various amendments to the 2002 convention between the UK and South Africa. In particular, it updates the dividends article to accommodate South Africa’s replacement of its so-called “secondary tax” on profits by a conventional withholding tax. In addition, the exchange of information article has been brought into line with the latest OECD model convention and is widened in scope to cover taxes of every kind and description. The two states have also agreed to insert a new article, again based on the OECD model convention, providing for assistance in the collection of each other’s taxes.
The protocol to the convention with Mauritius is very short and deals only with exchange of information. The convention was signed in 1981 and, although it has been amended twice before, in 1987 and 2003, the information exchange provisions have not been updated since 1981. This protocol, like the one with South Africa, brings the exchange of information article into line with the OECD model and will now cover all taxes.
I now turn to the three tax information exchange agreements. I have introduced debates on TIEAs in Delegated Legislation Committee a number of times in recent months, as the right hon. Member for Delyn will recall. Those TIEAs were, however, all signed by the previous Government. The three TIEAs we are discussing today were signed last autumn. I am pleased to reaffirm today this Government’s commitment to the continued expansion of the UK’s TIEA network and I hope they will enjoy the same cross-party support as hitherto.
Each of the TIEAs is similar, both to each other and to those we have debated before. They are based on the OECD model agreement on exchange of information on tax matters and provide for exchange of information on request to the international tax standard. In addition, and I understand this is a first for a TIEA, the agreement with Aruba provides for each party to provide information spontaneously on a case by case basis. This would take place where the tax administration in one jurisdiction comes across information that it believes would be relevant to a tax matter in the other jurisdiction. Spontaneous information exchange is long established among EU member states and I hope this will not be the last TIEA that provides for this form of co-operation.
I would like to say a few words of explanation about the agreement with the former Netherlands Antilles. Since this TIEA was signed, the Antilles has ceased to exist as a part of the Kingdom of the Netherlands. From 10 October 2010, the five islands that used to form the Netherlands Antilles have remained part of the Kingdom of the Netherlands, but in a different set-up. Curaçao and Sint Maarten now constitute separate countries within the Kingdom, similar to Aruba, whilst Bonaire, Sint Eustatius and Saba, referred to in the Order as “the BES Islands” for short, have become part of the country of the Netherlands as a special municipality—
Frank Dobson (Holborn and St Pancras) (Lab): Gosh!
Mr Gauke: I am sure that right hon. and hon. Members were already aware of that, but for the sake of completeness I thought that I would make it clear.
The UK has received assurances from the Dutch Government that, as the Kingdom of the Netherlands of course continues to exist, all agreements concluded with the Kingdom on behalf of the Netherlands Antilles that were existing on 10 October 2010 will be ratified for Curaçao, Sint Maarten and the BES Islands and will apply to those territories upon ratification. Responsibility for the administration of the agreements is, however, now divided between the Governments of Curaçao, Sint Maarten and the Netherlands.
I hope that these explanations are helpful. In conclusion, I commend these orders to the Committee and am happy to answer any questions that Members may have on their provisions.
10.34 am
Mr David Hanson (Delyn) (Lab): As you know, Mr Weir, because you have helpfully chaired many of these Committee sittings, we have had lots of discussions on similar orders in the last few months, most of which had their genesis under the previous Labour Government. They received cross-party support, and the orders before us today will have the support of the Opposition. The Minister has been very helpful with his explanations and I have only a few quick questions that I hope he can answer, if not today then at a later date.
We have had this discussion before, but I remind the Committee that the orders come into effect when they are ratified by all parliamentary jurisdictions dealing with them. Although I have asked the same question on every occasion we have considered such orders, the Minister has not yet told me what date the orders will come into effect. We are ratifying the orders today, but the Minister gave no indication of when they will be
enforced by the various jurisdictions with which we are entering into agreement. I would welcome clarification on that point.Given that the order relating to South Africa is dated 8 November 2010, can the Minister tell me whether the orders are operational from the date of ratification by the Parliaments or from the date of signing of the jurisdiction agreements? I have asked those general questions before, on every occasion we have considered such orders, so I am sure that the Minister is prepared to answer them. If he is not prepared to answer them, I would be very surprised and so I shall give him a few moments to gather his thoughts on those matters accordingly.
I have a further question about the Curaçao, Sint Maarten and BES Islands order. Article 3 indicates the taxes that are covered by the order and states:
“The taxes which are the subject of this Agreement are…in the case of the Netherlands Antilles…income tax…wages tax…profit tax…and the surtaxes on the income and profit tax”.
It also helpfully gives the Dutch translations of those taxes, which I will not attempt—
Mr Robert Goodwill (Scarborough and Whitby) (Con): Go on!
Mr Hanson: As the hon. Gentleman tempts me, I will try. Income tax is “inkomstenbelasting”.
The article lists four taxes that are covered by the agreement in the case of the Netherlands Antilles, but it also says that it covers
“in the case of the United Kingdom, existing taxes of every kind and description.”
I would welcome some clarification from the Minister of why we are undertaking to provide information exchange on taxes of every kind and description, but the Netherlands Antilles—in whatever form—are only providing information on income tax, wages tax, profit tax and surtaxes on income and profit tax. There is a discrepancy there and I would welcome the Minister’s clarification.
10.38 am
Mr Gauke: I thank the right hon. Gentleman for his support for these agreements. As he said, we debate such matters fairly regularly and he asks, reasonably, when these matters will be ratified. With regard to South Africa—a country in which I know he takes a great interest—it has completed its procedures already and ratified the agreement. The other countries have not. These agreements were signed relatively recently and it always takes time in all jurisdictions to complete parliamentary procedures. In the case of Curaçao, Sint Maarten and Aruba, the agreement will need to be ratified by two separate legislatures, but we do not expect an extended delay before these agreements enter into force. I cannot be more precise, but we expect them to be resolved within a few months.
Mr Hanson: As I said, I have raised this point with the Minister on every occasion that we have debated these orders. We pass the orders today and we never have any more feedback about them again. It would be very helpful if the Minister, when the orders—not just today’s, but previous ones—are finally ratified, could inform the House of Commons by way of written statement. Unless I table parliamentary questions on the point, we have no means of knowing when the
orders come into effect. He has just said that he expects it to happen in a few months, but there could be a problem and we would never hear about it.Mr Gauke: I cannot give a precise answer because the date is not within our control, as it depends on the procedures of other jurisdictions. The right hon. Gentleman makes a reasonable point about the need to ensure that Parliament is informed about whether these measures have come into effect. The procedure in place is that when they are finally ratified, they are announced in the London Gazette, the Edinburgh Gazette and the Belfast Gazette, and on the HMRC website. Although the right hon. Gentleman may not be a regular reader of those distinguished journals, he should perhaps subscribe, or perhaps I shall drop him an e-mail with a link to the HMRC website.
John Hemming (Birmingham, Yardley) (LD): I suggest that the right hon. Member for Delyn gets a simple RSS feed from the HMRC website, and then the information will pop up in his in-tray automatically.
Mr Gauke: My hon. Friend is always the first with constructive suggestions and I am sure that the right hon. Gentleman has noted that.
On the point about whether the orders become operational at the date of ratification or the date of signing, it is essentially the date of ratification. However, in the case of South Africa, it is possible to ask about matters that arose prior to the date of ratification, so the particular date does not have quite the same significance. The TIEAs are retroactive for criminal matters only, so if there is a criminal investigation we can ask questions that go back further.
On the specific question about the orders relating to Curaçao, Sint Maarten and the BES Islands, the right hon. Gentleman drew attention to article 3. I was disappointed that he did not go further with his explanation of the Dutch translations of the various taxes. He mentioned the Dutch for income tax, but the Dutch for wages tax is worth mentioning: it is “loonbelasting”. I am not sure that that name would win a tax much respect in this country. In any event, the right hon. Gentleman may have got things the wrong way round. The article actually means that more information is available to us, because it covers more of our taxes, than is the case with the Netherlands Antilles. We have the flexibility—
Mr Hanson: My point is that there is a difference between what the Netherlands Antilles are offering and what the UK is offering. I see a shaking of the head, but I wonder why there is an imbalance.
Mr Gauke: Those are the taxes that the Netherlands Antilles wanted to focus on, but there is no disadvantage or detriment to the UK and we have considerable flexibility on the issue. The difference arose as a consequence of the negotiations and the attempt to ensure that both parties achieved what they wanted to achieve. I hope that that provides the Committee with some clarity on that point and that it will accept these orders.
That the Committee has considered the draft International Tax Enforcement (Liberia) Order 2011.
DRAFT INTERNATIONAL TAX ENFORCEMENT (ARUBA) ORDER 2011
That the Committee has considered the draft International Tax Enforcement (Aruba) Order 2011.—(Mr Gauke.)
DRAFT INTERNATIONAL TAX ENFORCEMENT (CURAÇAO, SINT MAARTEN AND BES ISLANDS) ORDER 2011
That the Committee has considered the draft International Tax Enforcement (Curaçao, Sint Maarten and BES Islands) Order 2011.—(Mr Gauke.)
DRAFT DOUBLE TAXATION RELIEF AND INTERNATIONAL TAX ENFORCEMENT (SOUTH AFRICA) ORDER 2011
That the Committee has considered the draft Double Taxation Relief and International Tax Enforcement (South Africa) Order 2011.—(Mr Gauke.)
DRAFT DOUBLE TAXATION RELIEF AND INTERNATIONAL TAX ENFORCEMENT (MAURITIUS) ORDER 2011
That the Committee has considered the draft Double Taxation Relief and International Tax Enforcement (Mauritius) Order 2011.—(Mr Gauke.)