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Extension Of Power To Give Effect To Double Taxation Arrangements

Volume 385: debated on Wednesday 8 May 2002

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Question proposed, That the clause stand part of the Bill.

Clause 87 is a technical measure, designed to provide a useful power for Britain to enter into tax treaties with non-recognised territories. Taiwan has been cited as the jurisdiction where it will be most useful. The enabling provision on tax treaties is section 788 of the Taxes Act 1988, which is one of the measures being addressed or tinkered with. Has the opportunity been taken to make quite sure that it gives proper authority to all aspects of existing treaties as well as the proposed change?

In the past, the Inland Revenue has acknowledged that section 788 has shortcomings. In practice, there may not be a serious problem, but in principle it is less than desirable to enter into treaties without adequate statutory authority in the United Kingdom. I seek confirmation that, in looking at changes to section 788, the Government are satisfied that they have addressed the Revenue's concerns about its shortcomings.

I hope that the Minister will forgive me. She has always been very courteous to me, but she knows from the exchanges that we had in the Treasury Committee, before I was chucked off it, that I have the gravest suspicion about everything that she does.

I have a simple question about the reason for changing the words
"made with the government of any territory"
to
"made in relation to any territory".
The next clause, which of course we cannot discuss now, contains regulations that provide for different cases with respect to different territories. The clause states:
"The territories to which this section applies as respects an accounting period…are those specified as such in regulations".
9.15 pm

I am horrified because I gain the impression that the Government are asking for the power to apply different rules to different territories. There is no definition of how the territories will be selected, and there is no definition of what rules will apply. The Minister is aware that I am extremely concerned, for example, about what the Government are doing in relation to the Channel Islands. The policy that they seem to be adopting towards one of the Channel Islands seems to differ from the policy that they are adopting towards the others.

What worries me in particular is the fact that the Government are asking for blanket powers to bring in regulations that will apply to any place that they want, without ensuring that the same rules are applied to all territories. That strikes me as very worrying and not in the traditions of the House—

Order. With respect to the hon. Gentleman, I think that he will find that he is speaking to clause 88, not to the clause currently under discussion.

I would not think of taking up the time of the Committee. I was giving an example to illustrate my simple question about the reason for substituting the words

"made in relation to any territory"
in clause 87 for the words
"made with the government of any territory".
I shall, of course, say a few words on clause 88 if I have the delightful opportunity of catching your eye, Mr. Gale, but I should like to know why the words are to be substituted and what the aim is.

The clause amends the legislation that enables double taxation agreements to be implemented. In particular, it removes the existing requirement that the agreement is "made with the government" of the other territory. The other territory is the country—the jurisdiction.

The hon. Member for Arundel and South Downs (Mr. Flight) asked whether we were confident that the proposed wording was correct. I am confidently advised that the wording is correct, but the hon. Gentleman is right: if it were not correct, we would not have the authority to enter into a double taxation treaty, for which the clause provides. I assume that the wording is right, because I have been advised that it is right.

The purpose of the change is to enable legal effect to be given to a double taxation agreement in relation to the territory of Taiwan. The agreement must be made between two representative offices-the British trade and cultural office in Taipei, and the Taipei representative office in London. It was formally signed in London by the heads of those offices on 8 April 2002. The agreement will be laid for consideration by the House at the earliest convenient opportunity after the passing of the Bill. The reason that we need to change the wording is specifically to enable us to have an agreement with Taiwan. Other countries have taken similar powers in order to do that. Australia, New Zealand and the Netherlands have all implemented double taxation agreements with Taiwan, which were made between their representative offices and the Taiwan representative office in each country. The change is necessary because Taiwan is part of the People's Republic of China. It is one of our most important trading partners in Asia, and a double taxation agreement will provide considerable benefits to British companies trading in Taiwan, and will also serve to encourage Taiwanese investment in the United Kingdom. It is necessary to make changes in order to retain the internationally recognised definition of "the Government", and to reach an agreement with the representatives of Taiwan.

Is the Paymaster General suggesting that Taiwan has no Government? My understanding is that it has a democratically elected Government, while the People's Republic of China does not. Why on earth is the Paymaster General removing the word "government"? Is she making a concession to the People's Republic of China and, if so, what is the purpose of that concession? What is wrong with the existing words, given that Taiwan has a splendid Government, who are democratically elected and respected throughout the civilised world?

I have already answered that question. To my knowledge, Taiwan is not recognised by any Government. Other Governments have double taxation treaties for precisely the reasons I have given. If the hon. Gentleman thinks that the rest of the world is wrong in terms of its diplomatic relations with that part of the world, he is entirely entitled to hold that view; but the international agreements require the reference to a Government to be changed to a reference to a representative office, so that the balance of agreements already in existence can be maintained and an agreement with Taiwan can be secured.

That is all that the clause does. It is what many other countries have done. It is a welcome arrangement, which adds to the double taxation agreements that this country already has—more than 100—thus facilitating international trade and, in particular, the operation of our companies in countries where we have such agreements.

Question put and agreed to.

Clause 87 ordered to stand part of the Bill.