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Taxation (International and Other Provisions) Bill

Volume 505: debated on Thursday 4 February 2010

Motion made, and Question put forthwith (Standing Order No. 60(8)),

That the Committee of the whole House be discharged from considering the Bill.—(Mr. Timms.)

Question agreed to.

Third Reading

I beg to move, That the Bill be now read the Third time.

This Bill has two themes. First, it rewrites international provisions such as double taxation relief, transfer pricing, advance pricing agreements and tax arbitrage. Secondly, it helps users of tax legislation by relocating and, where appropriate, rewriting provisions that would otherwise have been left unhelpfully in the Income and Corporation Taxes Act 1988 or in one of the Finance Acts.

As we have just discussed, last year the tax law rewrite project completed the first part of rewriting corporation tax legislation when the Corporation Tax Act 2009 was enacted. A second Corporation Tax Bill, the sixth Bill produced by the project, has just received its Third Reading. As a result, the whole of the legislation relating to corporation tax will have been rewritten.

This is the seventh and final Bill produced by Her Majesty’s Revenue and Customs’ tax law rewrite project. As with the Bills produced by the project in the past, this one continues the work to modernise our direct tax legislation so that it is clearer and easier to use.

There is a further point that I want to make about the approach taken in this Bill. In rewriting the international provisions, this Bill, unlike previous rewrite Bills, does not separate them for income tax and corporation tax purposes. This different approach was agreed in consultation with users represented by the independent committees that oversee and support the work of the project.

The project takes great care to ensure that the effect of the legislation remains the same, but it can encompass minor changes in the law when they improve the legislation. There are 15 such changes detailed in the explanatory notes to this Bill, although of course major changes will always be matters for a Finance Bill. All proposed changes in the law are considered by both the project’s committees, and no minor changes are included in the Bill without their approval.

Again, I should like to express particular thanks to the UK tax specialists, and others. My gratitude also goes to members of the project’s consultative committee, chaired by Robina Dyall, who have ensured that the consultation has been detailed and thorough. The consultative committee includes representatives of small and large businesses, accountants, lawyers and other tax specialists. They have been very generous with their time and energy, for which we are very grateful.

The strategy of the project is set by its steering committee, chaired by Lord Newton of Braintree, which includes members from both Houses of Parliament, the judiciary, business and consumer groups. I am particularly grateful to Lord Newton for his commitment and guidance, and to the members of his committee.

As we debated previously, the Joint Committee of both Houses was chaired by the hon. Member for Chichester (Mr. Tyrie). It considered the Bill on 11 January and concluded that the Bill is a welcome clarification of the existing law, which as a result will be easier to use and more accessible to all users. The Committee was satisfied that the changes to the law were of very minor significance, and it accepted the amendments.

This Bill is a worthwhile contribution to modernising our direct tax legislation so that it is clearer and easier to use. It maintains the project’s excellent record in improving current legislation and has been welcomed by those who use it. Once again, I am grateful for the support that has been shown across the House throughout this work.

I commend the Bill to the House.

It is almost tempting to deliver essentially the same speech that I delivered a couple of moments ago, but that would break the heart of the Government Whip and I would hate to do that. I am also very tempted to say, “I refer the House to the speech I gave some moments ago,” but perhaps that would go to the other extreme.

The international aspect of taxation is hugely important for an outward-looking economy such as the UK’s. We witnessed great difficulties in 2008, when a number of companies moved their head offices out of the UK because of concerns over international taxation, in particular the Government’s consultation with regard to controlled foreign companies that was published in 2007. We touched on that point on Second Reading.

We welcome progress towards greater clarity in this respect, but we touched on the issue of controlled foreign companies in the Second Reading debate of 15 December. The Minister made it clear then that a consultation document was to be published in the new year, which would lead ultimately to legislation that I presume will be incorporated in this Bill when it becomes an Act. The consultation document was published in January, and the early indications that we have seen are encouraging. The Government are moving towards a more territorial system, and it is worth putting it on record that the Opposition believe that that is something that we need to pursue.

Of course, the real test will come when we see the details in the consultation document and what will follow from it. It might be useful to mention that one of the points raised with us is that we need to know how the new user-friendly motive regime contained in the consultation document will operate in practice. The outcome must avoid causing difficulties with HMRC and placing an administrative burden on multinationals that are looking to locate in the UK. It is important that we have a competitive tax system that encourages business to locate here.

Many of the remarks that I made earlier also apply equally to this Bill, and I should like to add my thanks to the various organisations and individuals that the Minister mentioned in his remarks, but I want to make a final point that I could also have made about the previous Bill. That is that witnesses at the Committee stage observed that the engagement by consultees seems to have fallen away slightly. As I noted in the earlier debate, the tax professions and businesses want legislation that goes further than merely clarifying and simplifying the language. They want something that starts to address the substance as well. I make that point again but, those comments apart, we support this Bill.

If the recommitted Corporation Tax Bill was opaque, this is doubly so, and I say that as a veteran of several double taxation statutory instruments in my time. I want briefly to commend the Government and the Minister for the seriousness of their intent in this matter. I note the updating of tax avoidance legislation. When 82 per cent. of central London commercial properties are owned by companies registered outside the UK—that is the figure from the chief executive of Her Majesty’s Revenue and Customs—when companies exploiting the developed world’s resources choose to base themselves largely in Bermuda, the Cayman Islands and the Isle of Man and pay little if any tax, and when our biggest retailer put its property portfolio in Liechtenstein, there is a problem, but it is one that the Government have endeavoured to square up to.

Tax avoidance and double taxation are two incompatible evils, and any Government who recognise the reality of international finance need to strike the right balance between them. The Government, and the Financial Secretary in particular, have been resourceful and persistent in their efforts in this regard, and have accelerated the work in this very complex field, using what coercive and persuasive powers they have. I know that the Financial Secretary has had discussions with Crown dependencies’ many tax havens and we see now a panorama of treaties around the world, and statutory instruments in this place are multiplying similarly. It is an important point. In a depressed world, it is important that all pay their fair share of tax, and an aspect of this Bill, at any rate, is part of the long, painful, not unrewarding task of making that happen, in which the Financial Secretary has played a conspicuous part.

Once again, I welcome the helpful remarks made by the hon. Members for South-West Hertfordshire (Mr. Gauke) and for Southport (Dr. Pugh). I was particularly interested in and grateful for what the hon. Member for South-West Hertfordshire said in passing about the discussion document that we have published recently on the reform of controlled foreign company rules. I agree with him about the importance of this key issue for the UK’s tax competitiveness and I welcome further discussion with him and others in the House and with the large number of companies and organisations that will be taking a close interest as work on this goes forward with a view to legislating—I hope, in the finance Act next year.

I am also grateful to the hon. Member for Southport for his comments about the seriousness of the Government’s intent in tackling tax evasion and avoidance. This is an area that he has taken a close and helpful interest in and I am grateful to him for what he said. Over the last year we have made more progress on tax information exchange than was made in the previous 10 years. The interest that he has shown is a helpful addition to making the progress that is needed.

May I take this opportunity to reiterate the remarks that I have made in some of those double taxation treaty Statutory Instrument Committees? I know that there is potentially a backlog in getting through some of the treaties, such is the number that have been entered into in recent years, and the Opposition are willing to co-operate with the Government to ensure that we can get through as many of those as possible. We think that that adds to the attractiveness of the UK as an economic proposition, as well as addressing some of the concerns about tax avoidance.

I am grateful to the hon. Gentleman for that.

Finally, once again I express thanks to the very large number of people who have contributed to the tax law rewrite, and my particular thanks go to Lord Newton and Robina Dyall. This is the final debate of its kind and once again I commend the Bill to the House.

Question put and agreed to.

Bill accordingly read the Third time and passed.