The UK does not have a tax information exchange agreement with Monaco, which until last year was classified by the OECD as an unco-operative tax haven. As a result of the G20 initiative on tax transparency taken at the London summit in March 2009, Monaco is now committed to the international standard of exchange of information. The Government are supporting a European Commission proposal for an exchange of information agreement with Monaco that would enable member states to obtain information for their tax purposes.
I thank the Minister for that helpful reply. Does he think it acceptable that Monaco has a tax treaty with France on a totally different basis than it has with any other country? I understand that French citizens resident in Monaco have to pay a wealth tax as well as income tax. I also understand that Monaco has promised that it will have a similar tax treaty with Germany, but there appears to be no ongoing negotiation with Britain. Should Britain not be committed to making sure that our arrangements with Monaco are similar to those with France and with Germany?
The arrangements with France are of considerable duration and reflect in part a contribution that is made by the residents of Monaco to services which they receive from France, so I do not think it is a good parallel. More importantly, we are working with the European Commission to secure a tax and information exchange agreement, but that is currently blocked in ECOFIN by the Governments of Austria and Luxembourg. If we do not make further progress, we have made it clear that we will press ahead and secure our own bilateral agreement with Monaco to ensure that we have access to information necessary for our own fiscal purposes.
I welcome the noble Lord’s assurance on that. We on these Benches would not want to wait for general agreement. Will he accept our congratulations on the fact that the Treasury and HMRC are co-operating closely with the Germans to get information on tax avoidance in places such as Liechtenstein? Will he also accept my congratulations on saying that Monaco is an “unco-operative tax haven”? Does he agree that that must be the understatement of the century?
On our Benches we exercise great care in our choice of language and avoid any opportunity to score cheap political points. Perish the thought that I would deviate from our policy in that respect. Monaco is an unco-operative tax environment but it clearly wants to come within the fold of greater disclosure, as do a number of other jurisdictions. Undoubtedly these pockets of offshore tax havens were a contributory factor to the world financial crisis, although I am not suggesting that it was in the front line, and there is an element of systemic risk attached to that, so we need to ensure that we have much better flows of information. We are now making good progress with Monaco but there is still a great deal more to be done. It would be tremendous if ECOFIN removed the blockage so that we could get a European Commission agreement. I accept the noble Lord’s congratulations.
My Lords, I am glad to hear that my noble friend always wants to be as clear as possible. Will he look at the Answer that he gave yesterday, which was gobbledegook? As regards Monaco and other offshore places where tax avoidance takes place, as he knows a couple of cases have arisen recently about the number of days one can spend out of the UK before tax is charged here. If the appeal on those cases is lost, will he have it in mind to change the legislation?
I am sorry that my Answer appeared to my noble friend Lord Barnett to be gobbledegook. I am particularly disappointed because I estimate that since I have been a Member of your Lordships’ House about one in three of all the Questions I have had to answer have come from him. So I immediately thank him for continuing to give me plenty of opportunity to improve my performance. Some questions, unfortunately, can be answered only by what might appear to be gobbledegook because they involve complex issues of the sort that the noble Lord, Lord Lawson, was challenging me on yesterday around Glass-Steagall and the Volcker rules. It would not be appropriate to anticipate the outcome of a court case.
What I have said is that we are a full and committed member of the European Community and we would always wish to work with our partner countries within Europe; but the European regime and architecture permits bilateral negotiations, and where we judge those to be in the best interests of the country we will of course enter into them.
I am not briefed on the situation in Belize; I have never really taken much interest in what goes on there. Perhaps I should do so. The issue of international tax and tax havens is important and undoubtedly there is seepage of money which should be coming to the UK Exchequer. The total amount of interest received from Monaco on its interest withholding tax agreements paid to the UK in 2009 was £1.4 million. I have a sneaking suspicion that we should be seeking a little more than £1.4 million from Monaco. I shall pass by the opportunity to say anything on Belize on this occasion.