With this it will be convenient to discuss the following:
Amendment No. 289, in
clause 196, page 127, line 43, at end insert
', being a description in respect of which the Community obligation or arrangements referred to in subsection (1) above apply.'.
Amendment No. 328, in
clause 196, page 127, line 44, at end insert
', being a description in respect of which the Community obligation or arrangements referred to in subsection (1) above apply,'.
Amendment No. 288, in
clause 196, page 127, line 41, after 'for', insert 'the immediate benefit of'.
The clause gives broad authority to the Treasury to make regulations to implement the savings directive. The implementation of exchange of information is a matter that should be addressed by Parliament and the secondary legislation approach is inappropriate, particularly as little attention has been given to taxpayers' safeguards. In principle there is an argument for redrafting the clause so that any legislative provisions that relate to exchange of information could be debated in Parliament.
We also note that there may be practical difficulties in the paying agent identifying whether the recipient is a UK resident. Specifically, amendment No. 200 has been requested by the overseas territories, which are concerned about the imposition of the EU savings tax directive without ongoing consultation, and limited discussion and negotiation. By constitutional convention the UK Government have avoided imposing financial regulations on overseas territories
because their citizens have no democratic representation in the UK. On this occasion the point has been put that the Treasury is threatening to part with that convention and impose the EU directive. The aim of amendment No. 200 is to ensure that the Finance Bill does not give the Treasury the power to impose the directive by Order in Council without the agreement of the territories. The amendment would require the UK Government to consult and agree next steps with the overseas territories.
I could give a longer and more detailed description of the concerns raised by the amendments, but given the time, I shall reduce that to putting some questions. Will the Paymaster General make it clear that the Treasury will undertake a regulatory impact assessment to assess the directive's impact on overseas territories? Will she make it clear that the directive will not be forced on overseas territories by an Order in Council without consultation?
Turning to amendment No. 288, under subsection (8) a person is treated as making
''savings income payments to another person''
not only if he
''makes payments of savings income to the other person''
but if he
''secures the payment of savings income for the other person'',
in other words, acts as a collecting agent. That reflects the wording of article 4.1 of the draft directive, which defines ''paying agent'' as an
''economic operator who pays interest to, or secures the payment of interest for the immediate benefit of, the beneficial owner''.
Subsection (8) does not contain such a reference to the securing of payment for the immediate benefit of the beneficial owner. That will presumably be reflected in regulations. That could be an important point, because the idea is that only the last economic operator in a chain of intermediaries should be required to provide information. Amendment No. 288 is really a probing amendment on that point.
Amendment No. 289 picks up the point that the intended scope of the directive is summarised in the commentary on article 4 of the EU Commission's proposals for the directive. Some clarification of the meaning in subsection (8)(b) of securing the payment of savings income would be helpful. The relevant section, 118C, of the Taxes Act 1988 set out in some detail who would be a collection agent, and in relation to what income. It seems unclear whether clause 196(8) is intended to catch functions other than that set out in paragraph 3 of table B in section 118C of the 1988 Act.
On amendment No. 328, clause 196(9) defines ''savings income'', in a definition that seems somewhat broad. It is defined as meaning interest subject to the possibility of certain categories being prescribed as not included or
''other sums of a prescribed description.''
The reason for that is that, under the directive, certain capital transactions such as sales of interests are notifiable. Nevertheless, it might have been better expressly to limit the power of prescription to sums falling within the ambit of the directive. A similar
point can be made in relation to the definition of ''relevant payees'', as the directive is meant to apply to individuals, whereas clause 196(10) refers to ''persons''. Amendment No. 328 is, in essence, a probing amendment to pursue that point.
Clause 196 provides for a scheme to help to counter tax evasion on cross-border payments of savings income by individuals. The scheme will enable us to implement the savings directive that was adopted at ECOFIN on 3 June this year.
The clause provides for the detailed rules of the scheme to be set out in regulations, and it sets out what the regulations may cover. Subsection (1) is the key provision, which determines the scope and purpose of the regulations. That subsection means, as I will make clear, that the four amendments are unnecessary. They all seek to limit the scope of the clause and the regulations that can be made under it. I want to explain, in a very little detail, why the clause already provides the safeguards that the hon. Gentleman seeks. I hope that he will then withdraw the amendment. If not, I shall ask my hon. Friends to reject it.
Subsection (1) limits the circumstances in which any regulations can be made to issues arising from Community obligations and from arrangements with other territories that are intended to ensure the effective taxation of savings income in the United Kingdom or the other territory. The rest of the clause then expands on the matters that the regulations may cover, but that first subsection is the key. Only matters arising from, or related to, a Community obligation or an arrangement with a territory with a view to ensuring the effective taxation of savings income in the UK and in that territory are relevant.
Amendment No. 200 would require that arrangements could be made with a territory other than a member state only after consultation and agreement. The amendment is rather curious, and insufficiently precise, as it does not make it clear with whom consultation should occur or whose agreement is necessary. It would be difficult to conclude an arrangement with a territory without consulting it or securing its agreement.
I should also like to make it clear to the Committee that a territory other than a member state may be prescribed as part of the scheme only if there is an arrangement with the territory that includes in its scope specific arrangements for the exchange of information to ensure the effective taxation of savings. That means negotiations and signing either a double taxation agreement or a tax information exchange agreement that includes within it relevant provisions relating explicitly to the effective taxation of savings.
Amendment No. 288 is intended to align the wording of the clause more closely with the directive. The amendment could prevent us from implementing the directive properly. As I have already said,
subsection (1) requires us to make regulations implementing, or dealing with, matters arising out of, or related to, a Community obligation or an arrangement with another territory. That means that the amendment is not needed.
Amendments Nos. 289 and 328 would repeat the limitation imposed by subsection (1) in subsections (9) and (10) of the clause. As I have already explained, subsection (1) of the clause is an overriding limitation on the whole clause, and it is not necessary to repeat it in other subsections. The clause allows us to implement the directive and any associated arrangements in full. That is what we will do.
The four amendments are unnecessary. The clause simply provides for implementing the directive and any associated arrangements with other countries. We will do that in a way that minimises administrative costs and compliance burdens, and we will consult fully on the new scheme. I hope that the hon. Gentleman will withdraw his amendments following my explanation. I confirm that we will publish a partial regulatory impact assessment when we start consultation. A full regulatory impact assessment will be published when regulations are laid.