Capital Gains Tax

Part of the debate – in the House of Commons at 3:02 pm on 28th April 2021.

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Photo of James Murray James Murray Shadow Financial Secretary (Treasury) 3:02 pm, 28th April 2021

I am grateful for the opportunity to respond on behalf of the Opposition to the motion concerning these two statutory instruments.

The two orders bring into effect arrangements between the United Kingdom and Germany and Sweden, respectively, as set out in the bilateral protocol signed earlier this year. Both protocols amend existing arrangements between the two relevant Governments for the avoidance of double taxation and the prevention of fiscal evasion with regard to taxes on income and capital gains. We will not oppose the Government on this motion. The protocols that the motion seeks to bring in would give effect to certain provisions recommended by the base erosion and profit shifting, or BEPS, project to protect tax treaties against avoidance activities. As the Minister will know, we welcome any provisions to combat tax avoidance and evasion. However, I would appreciate his addressing in his response some important questions and concerns about how the changes are being introduced and their wider context.

First, the total parliamentary scrutiny of these changes comprises the current debate, which has three speakers and is unlikely to last more than half an hour. This differs greatly from the standard practice in other countries. In the United States, for instance, tax treaties must be considered by a fully staffed congressional committee. That raises an important question about transparency and accountability as we find parliamentary scrutiny lacking. Perhaps, however, we should not be surprised by this Government seeking to avoid scrutiny. Just last week, the Government voted down a Labour amendment to scrutinise the impact of their policies on tax avoidance and evasion. That sense of a lack of transparency is compounded by the fact that the explanatory notes on the orders simply paraphrase the treaty changes in largely technical language and, therefore, do little to elucidate the matter for a wider audience.

Inaccessible explanations are an obstacle to full, open accountability. The explanatory notes explain that the protocols will have

“no, or no significant, impact on business, charities or voluntary bodies.”

Will the Minister explain what that implies about the revenue implications of the protocols being enacted?

Finally, as these orders relate to international tax avoidance and evasion, will the Minister further clarify, for the avoidance of any doubt, whether the Chancellor backs plans for a global minimum corporate tax rate, as proposed by the US President. The Financial Secretary may recall that I asked him this question in Committee of the whole House on the Finance Bill last week. He said that the Government

“welcome the renewed commitment that the US Administration have made in this area”.—[Official Report, 20 April 2021; Vol. 692, c. 914.]

That was not quite a yes to a global minimum corporate tax rate, so again I put a very simple question to the Minister: does the Chancellor back the plans proposed by the US President?