Clause 67 - Expenditure involving crime

Part of Finance Bill – in a Public Bill Committee at 6:00 pm on 11 June 2002.

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Photo of Ruth Kelly Ruth Kelly Financial Secretary, HM Treasury 6:00, 11 June 2002

The right hon. Gentleman raises a purely hypothetical and speculative point, which is of no practical relevance. Tax inspectors are trained to know accounts and would of course raise such a payment with the head office, but I would not expect that to be a problem in practice.

The hon. Member for Arundel and South Downs asked whether we should extend the bribery measure to offences committed under the law of other countries as well as our own. There is no European Union angle, as he suggested; we are merely following OECD guidelines in this case. We want the maximum degree of certainty for United Kingdom companies, which the measure will deliver.

The hon. Gentleman also asked whether the disallowance of deduction on a bribe in several countries could amount to multiple taxation. I do not believe that it would, because head office expenses would be allocated between branches in different countries and each country would apply its national law to those expenses. A bribe should not be deductible in any country, and it will not be multiple taxation.

The hon. Gentleman asked whether the clause would apply if a foreign company paid a bribe overseas and attributed part of its bribe to the United Kingdom branch as a management charge. I agree in principle that it would apply, although it would depend on the facts of the case. The part of head office expenses that

would be disallowed should equally be disallowed in the tax computation for the United Kingdom branch of a non-resident company. That is already the case for expenditure on such items as business, entertainment and gifts, and the Inland Revenue is not aware of any significant compliance issue in that regard.

For all those reasons, I ask the Committee to welcome the clause and agree to its implementation.