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Children, Schools and Families Bill

First Reading

7.35 pm

The Bill was brought from the Commons, read a first time and ordered to be printed.

Taxation (International and Other Provisions) Bill

Bill Main Page
Copy of the Bill
Explanatory Notes

Second Reading

7.36 pm

Moved By Lord Davies of Oldham

Lord Davies of Oldham: My Lords, I beg to move that this Bill be read a second time, and indicate the pleasure with which I undertake this obligation.

The Bill rewrites a number of international provisions, such as the double taxation relief and transfer pricing provisions. In order to help users, it also relocates and, where appropriate, rewrites provisions which would otherwise have been left unhelpfully in the Income and Corporation Taxes Act or one of the Finance Acts. Its main aim is to make the legislation clearer, better structured and easier to use than the source legislation, which is often dense and difficult to follow.

The Bill has been produced by Her Majesty's Revenue and Customs Tax Law Rewrite Project. It is the final Bill of the project, and follows the success of the project's previous Acts which we have all enjoyed debating in the House on previous occasions, and which rewrote the capital allowances and income tax legislation and the first instalment of the corporation tax provisions. The second and final instalment is included in another Bill which will be with us shortly.

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The Bill has not been certified as a money Bill. It was introduced in Parliament in another place in mid-November last year, and, under the special procedures applying to tax law rewrite Bills, the substantive debate on Second Reading was held in Committee. The Bill then passed to a Joint Committee of the two Houses where it was considered on 11 January. The Joint Committee included among its members the noble Lords, Lord Blackwell and Lord Goodhart, the noble Baroness, Lady Goudie, and the noble Lord, Lord Newton, who I am pleased to see in his place. I pay particular tribute to the work he has done repeatedly with regard to this very significant project, and I have no doubt that he is more relieved than any other noble Lord that we are coming to a conclusion. I also appreciate the work of the noble Baroness's colleague in another place, Andrew Tyrie, who chaired the committee and did sterling work.

The Bill then passed back to the House of Commons to be debated at Third Reading and is now before us for its remaining stages. Unlike previous rewrite Bills, this Bill is not a money Bill. Accordingly, if given a Second Reading today, it will be committed to a Committee of this House-although I very much hope that noble Lords will take the view that this Bill ought not to be amended, and I hope the noble Lord, Lord Newton, is here to give his benign support to that proposition.

It is beyond the remit of the project to make any significant changes in tax policy, and so it takes great care to preserve the effect of the legislation. It can, however, make very minor agreed changes-for example, to remove ambiguity, repeal obsolete material or correct minor anomalies. To ensure that any changes made are within the remit of the project, they are considered during an extensive, detailed and thorough consultation process involving the project's consultative committee whose members are drawn from the main tax professional and business representative bodies. We have been grateful to them in the past, too, for the work that they have done. Overall, the work is overseen by the independent steering committee, chaired by the noble Lord, Lord Newton.

The extensive consultation process that I mentioned involved publication, for public comment, of papers containing almost all the clauses in the Bill, and the Bill was also published in draft form for another round of consultation. An updated version was later published taking account of the consultation responses and the changes made by the Finance Act 2009. Throughout the process, proposed minor changes in the law were specifically drawn to the attention of consultees, and no minor changes in the law were included in this Bill without the considered approval of both the project's committees.

The Joint Committee of both Houses heard oral evidence from members of the Tax Law Rewrite Project team. It considered and accepted all the government amendments to the Bill, all of which it agreed were of a minor, technical nature, as was entirely appropriate. The Joint Committee concluded that the Bill is a welcome clarification of the existing law and, as a result, it will be easier to use and more accessible to Parliament, the judiciary, informed professionals, business

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people and other users of the legislation. It was satisfied that the changes to the law in the Bill are of very minor significance, as I mentioned earlier.

The success of the project in improving the accessibility of tax legislation to users has been borne out by independent market research, which has shown that in the main users of rewritten legislation have warmly welcomed it. It was seen to be of particular help to those newly entering the profession. Consultees have also been positive about the project's work.

It would be wrong of me to conclude without paying tribute to everyone who has taken part in this work. I sum up by saying that they have been responsible for an extremely worthwhile project with a track record that shows that it makes our direct tax legislation more modern, clearer and easier to use. The Bill maintains the high standards achieved in the project's previous Acts and will make the legislation more accessible to all. Accordingly, I commend the measure to the House.

7.42 pm

Baroness Noakes: My Lords, I thank the Minister for introducing the Bill and I am sure that he will join me in rejoicing that we are reaching the end of the road with tax law rewrite Bills. I think that this will be the last one to be completed, as the one relating to corporation tax, which we will debate next week, is a money Bill and will have all its stages taken together. I have not taken part in the proceedings on all of them but it feels as though I have.

As the Government have already announced, enthusiasm for further rewrite Bills has all but evaporated in the tax professionals community-that community having contributed massively to the success of the project. So, having cost some £37 million in direct costs and taken the best part of 15 years, the rewrite process is coming to an end.

I remind the House that the project was initially kicked off by my right honourable friend Mr Kenneth Clarke when he was Chancellor of the Exchequer. It was overseen by a steering committee chaired first by my noble and learned friend Lord Howe of Aberavon and then by my noble friend Lord Newton of Braintree, who I am glad to see is in his place this evening. That steering committee was supported by a vastly experienced consultative committee. One way or another, anyone who is anyone in the tax professional world has been involved in this project.

Of course, we must not forget the Joint Committee on Tax Law Rewrite Bills, to which the Minister referred. The committee was initially chaired by my right honourable friend Mr Kenneth Clarke, until he joined our Front Bench in another place. As the Minister said, his place was taken by my honourable friend Mr Andrew Tyrie. I join the Minister in paying tribute to all those who have laboured on this project over the past 15 years. It has been a very remarkable achievement.

Noble Lords will, I hope, note the strong Conservative involvement in the rewrite process from its very inception. This is no accident. A simplification of the tax code is an aim that we have long espoused. It is a matter of some regret to us that the past dozen years have seen

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the average Finance Bill more than double in size, and we now have the longest tax code in the world, which is not a title to be coveted.

Recent years have seen some of the most complicated tax legislation in our history. Sometimes the tax legislation is introduced in one year and then subjected to major revision and alteration over subsequent years as layers of complexity and obscurity are added. This is usually done in the name of tax avoidance but it is sometimes also due to the well known dangers of legislating in haste. If anyone has any doubt about the complexity of our tax system, they need only open the Bill randomly to see if what is there is easy to understand. I do not doubt that the painstaking way in which tax legislation has been reformulated has genuinely made complex tax law easier to follow but it does not mean that it has made tax law simple by a very long way.

When preparing for this debate I read annexe 1 of the Explanatory Notes, which explained why 15 small changes to the law were being proposed. The sixth change takes over two pages to explain the horrendously difficult interaction between income tax, capital gains tax, double tax relief and gift aid. This is what happens when good things, known as reliefs, come up against not so good things, like tax payable. These are the easier bits of the tax code. The rewrite project found a way to deal with this point. Its very complexity reinforced my conclusion that our tax code is overcomplex.

It might be fun but I will not test the Minister's detailed understanding of this Bill. However, I will test him on the Government's attitude to simplification. The Government have not shown any real understanding of the need to simplify the tax code. This is a much bigger project than rewriting complicated tax legislation in easier language. Tax simplification requires a wholly different approach. It requires reliefs to be reduced in number, since it is the so-called abuse of reliefs on which much tax avoidance is based, which has led to the volumes of anti-avoidance legislation. Simplification may also require a general anti-avoidance rule, although opinions are divided on this and such a rule can be very complicated to administer.

Our own policy, which was developed by my noble and learned friend Lord Howe, who has long promoted tax simplification, has two elements. The first is an office of tax simplification, which would be a permanent office with the task of preparing proposals for simplification on a long-term basis. It would work systemically through the tax code, making proposals for change. The second element, which would start to pay dividends very early, is much better scrutiny of tax legislation through the commitment to introduce tax changes only at the Pre-Budget Report and to allow time for proper scrutiny and consultation before the scrum of the Finance Bill process. A lot of bad Finance Bill provisions have had to have major, and not always successful, changes made during its passage. Earlier scrutiny would avoid much of this. Importantly, our proposals would involve Members of your Lordships' House, who I know contribute much to the careful scrutiny of tax legislation.

What policies do the Government have for simplification? Wearing my tax anorak, I was initially excited to see that the Government this week launched

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a tax framework for business. However, I was less impressed when I saw that this framework ran to only two pages and that the principle of simplicity was not exactly a fulsome commitment. It was rather more something to be considered alongside everything else. I do not know whether the Government also plan a tax framework for individuals but, if it is like the business one, it is probably not worth the effort. What is the Government's tax manifesto for the next Parliament? If it is no more than this new business framework, I believe that our tax code will implode if the Government are returned to power.

We are content with this Bill. The process leading to it was well tried and sound. The Minister in another place gave assurances in response to the prompting of my honourable friend Mr David Gauke that the Henry VIII provisions in Clauses 375 to 377 would be used only in conjunction with the steering and consultative committees, which we are satisfied with.

This is not the last time that we will see this Bill because, as the Minister said earlier, it is not certified as a money Bill, unlike the Corporation Tax Bill, which we will debate next week. We know that we cannot challenge the Speaker's certificate on a Bill as a money Bill, as we noted on considering the Fiscal Responsibility Bill just before the recess and, equally, we cannot challenge the lack of a certificate on a Bill. I hope we might be allowed a moment of reflection on why this Bill is not a money Bill when set alongside the Fiscal Responsibility Bill debated two weeks ago and the Corporation Tax Bill to be debated next week.

The distinctions between the Bills are subtle and the Speaker clearly has a hard task in deciding whether to give or to withhold his certificate. I am told that in 1910 there was a proposal for a committee to assist the Speaker in that difficult task and that that committee would have included Members of your Lordships' House. One hundred years ago, those proposals came to nothing and appear not to have been revived since. Perhaps this is a topic to be revisited if we ever see comprehensive reform of your Lordships' House. I do not expect the Minister to respond to that but I shall leave the topic hanging in the air for another day, in another context.

7.51 pm

Lord Newton of Braintree: My Lords, perhaps I may intervene briefly in the gap. I declare an interest, to which the Minister has already referred, in that I am the current chair of the steering committee that has overseen the production of this Bill and the Corporation Tax Bill, which I believe is due to be debated next week. Against that background, it is perhaps appropriate at this stage to offer the Minister my apologies for possibly not being able to be present to hear his dulcet tones again on Tuesday next. If I can attend, I shall. It makes me all the more pleased that I am able to be present this evening and to join the Minister in commending the Bill to the House.

Given the work that has gone into these Bills, and earlier Bills, from the tax law rewrite team and from the parliamentary counsel's office, it is very pleasing to have unanimous support from the Front Benches, subject, of course, to what the noble Lord, Lord

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Newby, is about to say. To judge from what I see, it appears unlikely that there will be a rebellion by Back-Benchers in any part of the House, including Cross-Benchers and clerics. Therefore, I trust that the House will go along with what the Minister has urged, including his admonition that no one should dare to amend the Bill, as that would break up the whole thing. In my view, it is in such quiet and consensual ways that much good work is done. Let us hope that that remains the case tonight.

7.52 pm

Lord Newby: My Lords, the noble Lord, Lord Newton, should have no qualms: I am not about to suggest erudite or stupid amendments to the Bill. I join everyone who has spoken in paying tribute to the team of officials and politicians who have laboured long and hard to produce this calibre of work. Unlike the noble Baroness, Lady Noakes, I was here when the Capital Allowances Bill passed through the House. I was a young man then. She talked about flicking through that Act and how complicated it was. Needless to say, I have not read the Capital Allowances Act in full detail but I flicked through it and noticed one problem that arises with tax law and accretes year after year. The page on which my eyes alighted related to a special capital allowance regime for dredgers. I have no idea why there is such a regime, but at the time there was clearly a good reason for putting in something that related to that very narrow part of our economy. It is that accumulation of good reasons over the years that has helped to make our tax law as complicated as it is.

As the noble Baroness pointed out, we have had in this Administration an extraordinary enthusiasm for long Finance Bills. From the outside, it almost seemed like a macho desire to outdo the number of pages in the previous Finance Bill, because it reached epidemic proportions. I am delighted that the noble Baroness has such faith in her party as to believe that, were it elected to government, it would be able to do something about that.

The proposal to have better pre-legislative scrutiny is important. I am not sure that of itself it simplifies things all that much, but it is a welcome proposal. The only proposal for simplification that I know of that would take out hundreds of pages of tax legislation at a stroke is an anti-avoidance rule. Not only would it do that but it would also block off the likelihood of many more hundreds of pages going on to the statute book. Although there are many arguments for and against that, my view is that it is worth doing. It would simplify the law and reduce the scope for further complexity. However, we will see whether a future Government of whatever colour are successful in simplifying tax law. It would be a major achievement for which they would get no credit whatsoever except from the professionals. I hope, however, that they try and are successful. In the mean time, we definitely wish this Bill godspeed.

7.56 pm

Lord Davies of Oldham: My Lords, I am grateful to noble Lords for their support, expressed in very differential ways. I perceived the sword of Damocles which the

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noble Baroness suggested should hang over my head with regard to future action when this Bill goes into Committee. Of course, we have one other piece of legislation to deal with in these terms.

Let me reassure the noble Baroness, who raised some quite fundamental points, that we are already committed to simplifying the tax system. We are engaging with a wide range of stakeholders in the tax simplification reviews and we have made progress over the past two and a half years with more than 50 changes to the tax system to simplify it. The noble Baroness labours the same point on almost every occasion when we have a substantial finance debate-even when we have a debate like this evening's, which may not be quite so substantial. She has access to World Bank figures so she knows, as well as I do, that it takes businessmen 110 hours to comply with the tax system in the United Kingdom, which makes us very well placed. It is longer than that by nine hours in Canada. It is 132 hours in France, 187 hours in the United States, 196 hours in Germany, 334 hours in Italy and 355 hours in Japan. If I were a businessman-I know that the noble Baroness has business at heart-I would rather think that the British tax system compares well with others and should not be berated in quite the way she suggests.

Baroness Noakes: My Lords, I would not like the Minister to get too carried away with the World Bank study. I know his fellow Ministers in another place have recently become rather fond of quoting that particular study. I am sure the Minister has read the detail, as I have. It is based on a hypothetical construct of a hypothetical company, which is then replicated around the world by a firm of accountants known as PricewaterhouseCoopers. It does not represent any actual measurement of actual effort required by companies across a whole spectrum. It is one hypothetical company with a set of characteristics. In addition, the

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PricewaterhouseCoopers study asked questions about how simple the tax systems were. Unfortunately, those results are not incorporated in the World Bank's overall indicators-so statistics are very nice, but let us not have too much of them.

Lord Davies of Oldham: Of course, I entirely accept what the noble Baroness says about the nature of this piece of research, but I invite noble Lords to consider what the noble Baroness would have made of it had the table been inverted and had the British figures been the worst. I do not have the slightest doubt that, in those circumstances and with such a significant source as the World Bank, she would have berated me with the figures-so she will not mind if I take some delight in quoting them.

I note also that while the other great promise of the Opposition is always that they are desperately concerned to get rid of red tape and reduce bureaucracy, here is another piece of bureaucracy that they propose to establish, which will no doubt appear in their manifesto-an office of tax simplification, with its sole focus on simplifying the tax system. That is an additional layer of bureaucracy and also an extra cost-but the noble Baroness will discount that as a jaundiced view of Conservative plans from this side of the House. However, we note that there is no simple answer even to the issue of simplification, apart from that proposed by the noble Lord, Lord Newby. His concept of a measure on tax avoidance is a coat that he has trailed on a number of occasions. The general view is that the concept is much easier to express than to deliver.

Bill read a second time and committed to a Committee of the Whole House.

House adjourned at 8.02 pm.

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