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Resolution of double taxation disputes

Finance (No.3) Bill – in a Public Bill Committee at 10:15 am on 11th December 2018.

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Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (Economy), SNP Deputy Leader 10:15 am, 11th December 2018

I beg to move amendment 137, in clause 82, page 58, line 9, leave out from “section” to “may” in line 10.

This amendment provides for all regulations under the new power to be subject to the affirmative procedure.

Photo of Nadine Dorries Nadine Dorries Conservative, Mid Bedfordshire

With this it will be convenient to discuss the following:

Amendment 138, in clause 82, page 58, leave out lines 13 to 17.

This amendment is consequential on Amendment 137.

Amendment 149, in clause 82, page 59, line 15, at end insert—

“128D  Review of effects of EU withdrawal

(1) The Chancellor of the Exchequer must review the expected effect on the exercise of the power to make regulations under section 128A in the event that—

(a) the UK leaves the European Union without a negotiated withdrawal agreement,

(b) the UK leaves the European Union following a negotiated withdrawal agreement.

(2) The Chancellor of the Exchequer must lay a report of the review under subsection (1) before the House of Commons within two months of the passing of the Finance Act 2019.”

This amendment would review the impact of the main powers under clause 82 in the event the UK leaves the EU under (a) no deal or (b) a withdrawal agreement.

Amendment 150, in clause 82, page 59, line 15, at end insert—

“128D  Review of revenue effects of section 128A regulations

On each occasion the Treasury exercises the power to make regulations under section 128A, the regulations (or, as the case may be, the draft regulations) must be accompanied by a statement by the Chancellor of the Exchequer of the expected revenue effects of the regulations.”

This amendment would require any regulations to be accompanied by a statement on expected revenue effects.

Clause stand part.

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (Economy), SNP Deputy Leader

I will come to amendments 137 and 138, but first I would like to speak briefly to Labour amendments 149 and 150.

We have seen the complete and total shambles over the past 24 hours—and not just over that period, but over the past two years. The past 24 hours have highlighted where we are in relation to EU withdrawal. Various people are suggesting that no deal is more and more likely, so it is incredibly important we know the potential effects of any changes that the Government propose to make to legislation in the event of a negotiated deal or no negotiated deal. We have a clear idea of the effect of retaining the status quo, which is the Scottish National party’s preferred position, and the revenue effects would be much easier to calculate. We are comfortable supporting Labour’s amendment 149 on that subject and amendment 150, which is about the expected revenue effect of the regulations.

I turn to the two SNP amendments. Amendment 138 is consequential on amendment 137, so I will focus on amendment 137. Given what has happened in recent times, trust in the Government is possibly at its lowest ever point. We are being asked to agree to give the Government power to make changes without going through proper scrutiny procedures. The Government are basically asking us to trust them, and we feel that we cannot trust pretty much anything they say right now, so more scrutiny is sensible.

When people who support leave talk about the European Union referendum and Brexit, they talk about taking power away from faceless bureaucrats in Brussels and returning it to Parliament. A lot of the legislation that is being considered just now does not return that power to Parliament in any meaningful way, and it does not allow Parliament proper scrutiny of the range of things that could come through. We are talking here about just one small area, but that problem has been highlighted in a huge number of things that have come out of the European Union (Withdrawal) Act 2018. There is massive concern from members of the general public, who now understand what Henry VIII powers are—we are in unprecedented times. There has been a power grab from the Scottish Parliament, and this is one more small thing the Government are trying to do to take power away from where it should sit.

Given that the Government cannot command a majority in the House; given that they folded on SNP amendments to the Bill—that was, clearly, because the SNP amendments were wonderful, rather than because the Government did not have a majority—and given that they cannot get legislation through, the level of Executive power needs to be tested. We need to make the Government use their majority if they want to get powers through the House, rather than relying on the fact that because they are the Government, they can do what they like. That is why the SNP has tabled amendment 137, which would require the Government to ensure that more of the regulations made under clause 82 go through the proper scrutiny procedure, rather than relying on the Treasury to make some of them without proper scrutiny.

Photo of Anneliese Dodds Anneliese Dodds Shadow Minister (Treasury)

I will speak briefly to the clause. The hon. Lady has set out the SNP’s reasons for tabling amendments 137 and 138. The official Opposition agree with those reasons, and it seems highly sensible to require regulations to be subject to the affirmative procedure. We have argued for that consistently in relation to our future relationship with the EU and the no deal process. We are concerned about the wholesale power grab that unfortunately appears to be continuing apace. We would support SNP Members if they decided to press their amendments to a vote.

We have tabled two amendments, and I am pleased to hear that the SNP support them. Under the Prime Minister’s proposed withdrawal agreement, the UK would initially, at least, continue to align itself with EU regulations, but little information has been provided alongside the clause to indicate how the Prime Minister’s Brexit deal would impact on Council directive 2017/1852, particularly if there was divergence later on. Similarly, the Treasury’s policy note offers no guidance about whether the EU’s resolution mechanism would be upheld for all future double taxation disputes in the event of a no deal Brexit.

That is of a piece with the general lack of information about the Government’s anticipated future relationship on tax matters with the EU. I have consistently asked whether we would seek to be a member of the code of conduct group, for example, and I have had no indication of the Government’s views on that matter. With that in mind, the Opposition have tabled amendment 149, which would require the Chancellor to publish a review of the impact of the powers under clause 82 in the event that the UK leaves the EU under a no deal Brexit or under the current withdrawal agreement—or whatever it becomes. It is unclear whether it will be changed or whether assurances will simply be produced in relation to it. Whatever happens, we may or may not be voting on it at some point, hopefully in the near future. Amendment 149 would require the Treasury to offer a clear indication of how the EU’s dispute resolution mechanism for double tax disputes would be maintained, and the likelihood of the different possibilities.

Amendment 150 would require the Chancellor to undertake a review of the revenue effects of the measure. The Treasury policy note states that the measure will raise no revenue and will have no economic impact on taxpayers. That is rather hard to believe, given that even the most benign change to the tax system can have far-reaching and unseen consequences. They may be unpredictable, but surely it would be better to say that than to say that the change will have no impact. The Chancellor would therefore be required to outline in the review the possibility of any unforeseen economic impacts, and the revenues that are likely to be raised from this measure after the Treasury makes regulations to use the powers.

Photo of Robert Syms Robert Syms Conservative, Poole

Had we had a meaningful vote today—we are not going to have one—I would have voted with the hon. Members for Oxford East and for Aberdeen North. However, I find it a little strange that those who intend to vote against the agreement should criticise the Government for a no deal Brexit, because ultimately that is not the Government’s position.

There are about 800 statutory instruments for leaving the European Union. About 600 of them are negative, and a hundred and something are affirmative. It is perfectly possible for the Opposition to pick any number of negatives to pray against. If the Opposition have a problem with something, they can pray against it when it appears on the Order Paper and get a debate. There is a remedy for hon. Members’ concerns, but the reality is that so many of these things are modest and technical, and there are more important matters of principle for us to discuss. I do not think we want to spend a lot of time in this Committee or others debating minor, technical issues.

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (Economy), SNP Deputy Leader

I am on the European Statutory Instruments Committee, as are other Committee members. Sifting the proposed negative statutory instruments and changing some of them into proposed affirmatives has been a really interesting and useful process, which has shown us that the Government do not always make the right decision. Something like that for the long term would probably allay some of our concerns.

Photo of Robert Syms Robert Syms Conservative, Poole 10:30 am, 11th December 2018

I come back to my basic point that there are certain matters of principle that are good for parliamentary debate, and there are minor, technical matters, such as those dealing with the Inland Revenue. I am not sure that debating the latter would bring much to the sum of human happiness. I also make the point that, although the Conservative party does not enjoy a majority in the House of Commons, the Scottish National party does not enjoy a majority in the Scottish Parliament, so we are all sort of in the same boat.

Photo of Peter Dowd Peter Dowd Shadow Chief Secretary to the Treasury

I take the hon. Gentleman’s point about technical matters and grander principles. However, given that the Government have not allowed us to amend the law in any significant way, the Committee is left at this point poring over the detail—the grander principles are being brushed aside by the Government. We are unable to scrutinise the Bill at the grander level or at the specific level.

Photo of Robert Syms Robert Syms Conservative, Poole

The hon. Member makes his own point. We have discussed Budgets and Finance Bill Committees before. The Bill has been on the Floor of the House and will go back there. There will be endless debates, and I am perfectly sure that he and his formidable Front-Bench team will be able to make their points when the Bill goes back to the House. Ultimately, the Government have taken a perfectly pragmatic view, and I look forward to the Minister’s reply.

Photo of Mel Stride Mel Stride Financial Secretary to the Treasury and Paymaster General

An interesting observation: as soon as “EU” appears in a clause, we suddenly have more interest from the Committee than for other measures. Ms Dorries, I will endeavour not to stray into too much detail around the pros and cons of the current deal and the White Paper and all that kind of stuff, and will stick to the clause.

The clause enables the Government to make changes to bring into force the regulations and administrative provisions necessary to comply with the EU directive on tax dispute resolution mechanisms within the European Union. Double taxation arises when the same profits are taxed twice by two different tax authorities. It can create serious obstacles for businesses operating across borders by creating excessive tax burdens, leading to inefficiencies and an economic disincentive to trade. An effective tax dispute resolution system can help to alleviate double taxation.

The UK is a signatory to the convention on the elimination of double taxation in connection with the adjustment of profits of associated enterprises within member states of the European Union, known as the arbitration convention. The UK has also entered into bilateral tax treaties with every EU member state for the purpose of eliminating double taxation. Following a review, it was concluded that the mechanisms currently provided for in bilateral tax treaties and the arbitration convention might not achieve the effective resolution of double taxation disputes between member states in all cases in a timely manner. Consequently, the directive was adopted to build on existing systems. The UK supported the aims of the directive and agreed the adopted text in 2017.

The powers contained within the clause are necessary to enable the Government to introduce secondary legislation to implement the directive. Some proposed amendments would apply the draft affirmative procedure to all regulations made under the clause. As it stands, the Bill ensures that the scrutiny procedures applying to the exercise of each power are appropriate and proportionate. The primary purpose of these powers is to give effect to an EU directive that has already been published. The exercise of the powers will therefore be a largely technical exercise—a point made by my hon. and gallant Friend Sir Robert Syms, who also raised the important point that Committee members who wish to further debate a negative SI can of course can pray against it—to transpose the agreed text into UK law. It would not be appropriate to apply the affirmative procedure to all the regulations.

An amendment has also been tabled that asks for a review of the effect on the exercise of the power contained in the clause of the UK leaving the EU with or without a negotiated withdrawal agreement within two months of the Finance Act 2019 being passed. The Government’s intention is for a negotiated withdrawal agreement to apply to the UK, and therefore an implementation period, so that we can use the powers in the clause to implement the EU directive. As a responsible Government, we are also planning for the unlikely event of leaving the EU without a deal. Given the reciprocal nature of double tax dispute resolution, it is difficult to see how legislation implementing the directive can work in a no-deal scenario, but we do not think it would be beneficial to commit to producing a report so close to EU exit, and before the transposition deadline of the directive in June 2019.

A further amendment asks for a statement by the Chancellor on the revenue effects of the exercise of the power under the clause. The Government intend to publish a tax information and impact note for the draft regulations. That will include an assessment of the expected revenue effects of the regulations. I am pleased to say that my hon. and gallant Friend the Member for Poole thoroughly approves of the tax information and impact notes regime which, as he knows, is rigorous and helpful. As a result there will be no need for the Chancellor to make an additional statement to the House.

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (Economy), SNP Deputy Leader

I do not have much to add other than that I still want to press amendment 137 to a vote.

Photo of Anneliese Dodds Anneliese Dodds Shadow Minister (Treasury)

Briefly, the Minister referred to TIINs. I wonder whether, for the next Finance Bill, he will commit to ensuring clear linking from the Bill website to the different TIINs so that we can quickly see which one applies to each clause. It has been quite a waste of time having to search for them randomly.

As to the question whether the provisions should be examined using the affirmative procedure or should have to be prayed against using the negative procedure, I take on board the points made by the hon. Member for Poole. However, we all know that, when measures are dealt with by the affirmative procedure by default, much greater attention needs to be given to them. That is the reality. Generally, I fear that attention is not always paid to matters that may superficially appear technical but that, when one delves into them, may be discovered to have a concrete impact on different groups. Even with the affirmative procedure, the level of debate on taxation matters has, I would argue, traditionally been quite limited. I note that, for the first time in Parliament’s history, we have recently had votes in relation to tax treaties. I was pleased that we motivated those votes, yet UK tax treaties with other countries have never been subjected to proper scrutiny in the House.

Many matters covered by Delegated Legislation Committees are not purely technical. In fact, this has been talked about by my hon. Friend, who represents Leeds—help me out. [Hon. Members: “Stalybridge!”] I am sorry, I am not great at the memory game. In talking recently about some of the no-deal planning, my hon. Friend the Member for Stalybridge and Hyde has been talking about the potential for some of those measures to have such a significant impact that the Government themselves are not au fait with it. Given the time allotted, they seem to expect the Opposition to pass them with a rather cursory glance. I am afraid, therefore, that the suggestion that we already have a failsafe system for dealing with some of those significant matters is simply incorrect, so if the SNP presses amendment 137 to the vote, we shall support it. However, we will not press our amendments.

Photo of Mel Stride Mel Stride Financial Secretary to the Treasury and Paymaster General

Perhaps I may quickly respond, Ms Dorries, just to say that on the important matter of the TIINs, and the link from the website, I know that the hon. Lady raised that on a previous clause, and I should be happy to look into it for her. If she has any specific ideas that she would like to put to me in that respect, I should be grateful to receive them.

Finally, on the matter of negative SI procedure, and prayers against such measures, in the event that we have an effective, strong, organised, united and well led Opposition, I am sure that that will not be beyond them.

Question put, that the amendment be made.

The Committee divided:

Ayes 9, Noes 10.

Division number 41 Finance (No.3) Bill — Resolution of double taxation disputes

Aye: 9 MPs

No: 10 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

Question accordingly negatived.

Clause 82 ordered to stand part of the Bill.

Clause 84