Meeting Summary
The Committee considered the following documents:
Brexit related issues
Law enforcement and security
- what means are available to the UK after Brexit to secure direct or indirect access to data held in the Visa Information System (VIS) for law enforcement purposes;
- when the Home Office expects to conclude its review of EU law enforcement and security cooperation measures and the capabilities they deliver; publication of that review and the Government’s assessment of the practical and operational utility of the EU police and criminal justice measures in which the UK currently participates and the various options available to the Government to secure continuing UK participation in them or other means of cooperation once the UK has left the EU;
- whether the Government wishes to remain part of the European Criminal Record Information System (ECRIS) following the UK’s withdrawal from the EU and other options to enable “the proactive sharing of convictions data” outside the ECRIS system, as well as the extent to which they would be likely to be available to the UK following Brexit;
Cooperation agreements with Afghanistan and Cuba
- the Committee noted the Government’s statement that whether and how EU agreements with external countries continue to apply to the UK post-Brexit will be an important topic in the withdrawal negotiations;
Ocean Governance
- what are the UK’s preparation for ocean governance—including fisheries management—post-Brexit; and
Drug addiction
- whether the Government is undertaking an assessment of the costs and benefits of continuing UK participation in the European Monitoring Centre for Drugs and Drug Addiction (EMCDDA) post-Brexit.
Chapter summaries
Taxation: a common consolidated corporate tax base
Direct taxation is a matter for which individual Member States have a particularly strong interest as it not only governs the revenue available to each Member State but is also inextricably linked to their social and other policy choices. This is reflected in the fact that powers in this area can only be exercised by the EU if Member States unanimously agree. Therefore the principle of subsidiarity in this area needs to be exercised with particular rigour.
The Commission has recently renewed its longstanding efforts to establish a “Common Consolidated Corporate Tax Base” (CCCTB) for the EU by publishing two proposed Council Directives. One would introduce as a first step a common corporate tax base (CCTB) with application from 1 January 2019 and the other would introduce as a second step a CCCTB with application from 1 January 2021. Although the two proposals would largely repeat the content of an earlier proposal, the system would only be mandatory for companies in large groups. For others it would be voluntary. The Commission has also proposed additional provisions concerning allowances for growth and investment and for research and development and to address a bias, inherent in present taxation rules, towards debt for investment, rather than equity.
The Government makes only a cursory reference to the possibility that the new proposals continue to breach the subsidiarity principles. But it does repeat to us its belief that the proposals would diminish the sovereign right of Member States to set and control their own taxes and be ineffective in tackling tax avoidance, particularly at the global level, and that the most effective way to tackle tax avoidance is through implementing the OECD Base Erosion and Profit Shifting outputs agreed by the G20, to ensure profits are taxed where they are generated. However, while keeping the proposals under scrutiny pending developments in their negotiation, we have ourselves considered the subsidiarity issue and have recommended that the House issue a Reasoned Opinion showing why the subsidiarity principle is breached.
Subject to a separate report; Not cleared; a draft Reasoned Opinion recommended for debate; drawn to the attention of the Treasury Committee.
Comprehensive Economic Trade Agreement (CETA) between the EU and Canada
Given its legal and political importance to the UK, both while a member of the EU and in view of Brexit, the Committee recommended CETA for debate on the floor of the House at its meeting on 7 September. The Government overrode parliamentary scrutiny at the Foreign Affairs Council on 18 October as it endorsed the signature, provisional application and conclusion of this deal before the debate had taken place. The Committee called the Secretary of State in to given urgent oral evidence on the reasons for the override and its implications for parliamentary scrutiny of trade deals on 26 October.
The Secretary of State (Dr Liam Fox) provides a further update on recent developments and reiterates his commitment to a debate. He notes that the vote in the European Parliament is now scheduled to take place on 2 February.
The Committee:
- reiterates the urgency of the debate, which must take place before the European Parliament gives its consent to CETA and no later than mid-January; and
- highlights outstanding issues necessary to inform the debate, including the: distribution of losses as well as gains across the UK from provisionally applying the deal; the exercise of competence and who can trigger and terminate provisional application; and the Brexit implications of the deal, in particular what work the Government is doing to assess whether it will be desirable and/or possible for this agreement to continue post Brexit and what impact the Belgian ‘exclusions’ (their insurance markets are not part of the market access provisions) may have for a future UK-EU trade deal.
Not cleared; further information requested; previously recommended for debate on the Floor of the House; drawn to the attention of the International Trade and Exiting the EU Committees.
Digital Single Market: Connectivity (Telecoms) Package
As part of its wider Digital Single Market Strategy, the Commission has proposed a wide-ranging telecoms package that is intended to promote internet connectivity across the EU and participation in the digital economy. The main legislative proposals include a draft Directive on the Electronic Communications Code (the “Code”), which proposes substantive reforms to existing EU telecoms rules by consolidating and incorporating four existing telecoms/e-comms Directives into one, and a proposal for a Regulation establishing the Body of European Regulators of Electronic Communications (BEREC) as an EU agency to reflect its increased mandate and objectives set out in the Code (the “BEREC Regulation”).
The Government is generally supportive of the non-legislative measures proposed by the Commission, including the 5G Action Plan, and is working up its position on the Code and the BEREC Regulation, with a view to securing a Whitehall agreed position by early December. It expresses reservations in relation to certain aspects of the Code and the BEREC Regulation—in particular, on spectrum management. It notes that the proposals will “remain influential when the UK leaves the EU”, stating that if the UK remains in the EEA the Code will continue to apply and, if not, it will continue to place regulatory conditions on UK companies trading in the EU.
The Committee seeks further information on the Government’s negotiating position in view of ongoing stakeholder engagement and the Brexit implications of the legislative proposals.
Non-legislative proposals cleared; Legislative proposals (the Code and BEREC Regulation) not cleared and further information requested; all documents drawn to the attention of the BEIS and Culture, Media and Sport Committees.
Regulation of new psychoactive substances:
Agreement on a General Approach on a proposal to reform the EU legal framework for regulating new psychoactive substances—so-called “legal highs”—is expected at the Justice and Home Affairs Council on 8/9 December. The proposed Regulation (which will apply to the UK) strengthens the role of the European Monitoring Centre for Drugs and Drug Addiction (EMCDDA) in facilitating the exchange of information on new psychoactive substances, operating an early warning system and preparing risk assessments. The proposed Directive (which will not apply to the UK) is the instrument through which participating Member States will implement criminal sanctions for the highest risk substances. The Committee expresses continuing disappointment at the Home Secretary’s reticence to respond to questions concerning the UK’s future relationship with the EMCDDA following the UK’s withdrawal from the EU. It asks whether the Home Office is undertaking an assessment of the costs and benefits of continuing UK participation in the EMCDDA post-Brexit and whether the Government believes that it would be in the UK’s interest to establish a formal working relationship with the EMCDDA.
Cleared; further information requested; drawn to the attention of the Home Affairs Committee and the Committee on Exiting the European Union.
Exchanging information on criminal convictions
The proposed Directive would extend the European Criminal Record Information System (ECRIS) to include the offending history of third country (non-EU) nationals who have committed crimes in the EU. The UK has opted into the proposal. The European Scrutiny Committee asks the Minister for Policing and the Fire Service (Brandon Lewis) whether the Government wishes the UK to continue to participate in ECRIS once the UK leaves the EU. The Committee also asks him to explain the other options under consideration to enable “the proactive sharing of convictions data” outside the ECRIS system and the extent to which they would be likely to be available to the UK following its withdrawal from the EU.
Not cleared; further information requested; drawn to the attention of the Home Affairs Committee and the Committee on Exiting the European Union.
Taxation: avoidance
In May 2016 we granted the Government conditional waivers allowing it to support aspects of a proposed Council Directive about tax avoidance practices that directly affect the functioning of the single market. We have now been told the adopted Council Directive contains five measures which meet the UK’s interest that they match recommendations of the OECD’s Base Erosion and Profit Sharing action plan. A sixth proposed measure which was deemed unnecessary in relation to the OECD recommendations, and which the Government opposed, was dropped. These developments of which we are now aware enable us to clear the document from scrutiny. However, we note that, the Government appears to have overridden scrutiny because of casual indifference to the terms of our scrutiny waiver. Prompt information about developments, as we required, would have meant the override was avoided.
Cleared from scrutiny.
Taxation: double taxation dispute resolution
The Commission has proposed a Council Directive to lay down rules which would provide mechanisms for resolving disputes between Member States’ tax authorities about how double taxation should be eliminated in a business context. The Government supports the proposal as it believes that double taxation is a serious obstacle for businesses operating across borders and for international investment, and is committed to improving double tax dispute resolution mechanisms. The Government does not suggest that there is any problem for the UK with this proposed Council Directive. However, we are keeping the document under scrutiny pending information from the Government on two points: how the Government envisages double taxation agreements working, particularly in relation to dispute resolution, with the remaining Member States post-Brexit; and whether it expects any difficulties to arise during negotiation of the proposed Council Directive.
Not cleared; further information requested.
Documents drawn to the attention of select committees:
(‘NC’ indicates document is ‘not cleared’ from scrutiny; ‘C’ indicates document is ‘cleared’)
Business, Energy and Industrial Strategy Committee: Digital Single Market: Connectivity (Telecoms) Package – non-legislative measures [Commission Communications (C)]; Digital Single Market: Connectivity (Telecoms) Package – legislative measures [(a) Proposed Directive, (b) Proposed Regulation (NC)]; Digital Single Market: Collaborative Economy [Commission Communication (C)]
Culture, Media and Sport Committee: Digital Single Market: Connectivity (Telecoms) Package – non-legislative measures [Commission Communications (C)]; Digital Single Market: Connectivity (Telecoms) Package – legislative measures [(a) Proposed Directive, (b) Proposed Regulation (NC)];
Exiting the European Union Committee: International Ocean Governance [Joint Communication (NC)]; New Psychoactive Substances [(a) Proposed Regulation, (b) Proposed Directive, (c) Proposed Regulation (C)]; Exchanging Information on Criminal Convictions [Proposed Directive (NC)]; Comprehensive Economic Trade Agreement (CETA) between the EU and Canada [Council Decisions (NC)]
Foreign Affairs Committee: International Ocean Governance [Joint Communication (NC)];
Home Affairs Committee: New Psychoactive Substances [(a) Proposed Regulation, (b) Proposed Directive, (c) Proposed Regulation (C)]; Exchanging Information on Criminal Convictions [Proposed Directive (NC)]
International Trade Committee: Comprehensive Economic Trade Agreement (CETA) between the EU and Canada [Council Decisions (NC)]
Treasury Committee: Taxation: a Common Consolidated Corporate Tax Base [Proposed Directives (NC)]
9 December 2016