John Pugh (Southport, Liberal Democrat)

I do not have a problem with the amendments, but I want to probe the Minister on one point. Controlled foreign companies, being controlled foreign holding companies, are obviously a good thing and international commerce creates sundry types and forms, and various structures will exist internationally, and that is all to the good. There is a natural moral distinction between legitimate companies as part of ordinary business development and illegitimate companies that are set up expressly for the purpose of tax avoidance. There seems to be a parallel distinction in schedule 16 between local holding companies, which enjoy exemptions, and non-local holding companies, which have their exemptions withdrawn—as is also the case with superior holding companies. I support that; I support all the changes in corporate taxation that have been identified by the Minister. The acid test, and it seems a fair test, is always identifying the ultimate corporate parent or beneficiary.

I admit that it is slightly tangential, but I would like to ask the Financial Secretary about the Tesco case. I am not familiar with its exact techniques, but the Minister will be aware that it set up a controlled foreign company in Liechtenstein. This was not to avoid corporation tax, which it was accused of by The Guardian and which it exonerateditself from, but in order to avoid stamp duty. Do the provisions in schedule 16 have any implications for such tax loopholes?

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