EU law relating to excise duty

Taxation (Cross-border Trade) Bill – in a Public Bill Committee at 3:00 pm on 1 February 2018.

Alert me about debates like this

Photo of Anneliese Dodds Anneliese Dodds Shadow Minister (Treasury) 3:00, 1 February 2018

I beg to move amendment 134, in clause 47, page 33, line 7, at end insert—

“(5) No regulations may be made under this section after the end of the period of two years beginning with exit day.

(6) In this section, “exit day” has the meaning given by section 14(1) (interpretation) of the European Union (Withdrawal) Act 2018 and subsections (2) to (5) of that section apply to the term under this section as they apply to the term in that Act.”

This amendment limits the duration of the delegated power under Clause 47 to the period ending two years after the United Kingdom leaves the European Union.

With this it will be convenient to discuss the following:

Clause 47 stand part.

Clauses 49 and 50 stand part.

That schedule 9 be the Ninth schedule to the Bill.

Photo of Anneliese Dodds Anneliese Dodds Shadow Minister (Treasury)

We have already discussed clause 47 to an extent, so I will just offer a couple of brief observations in relation to amendment 134. My reading of clause 47 is that it disapplies the European Union (Withdrawal) Bill provision that EU legislation should be copied into UK law, and empowers the Treasury to make alternative provisions on excise duty.

Some of our witnesses suggested that that could result in an unnecessarily complicated approach, and I do not feel that the Minister explained why the Government will not just retain the EU customs code during the transition period. The Minister has referred to a cut-and-paste approach. Yes, there is a lot of cutting, but then there is some spraying about of some elements and not others. It is perhaps not as well thought through as we might have hoped.

As with many Opposition amendments, amendment 134 asks the Government to include a sunset clause of two years for the application of these measures. We seek to ensure that the empowerment of the Treasury in these provisions is time limited. As my hon. Friend the Member for Stalybridge and Hyde said in relation to the sunset clause he discussed, the measures could be extended by Parliament if that was felt necessary, but having a sunset clause would prevent the inappropriate extension of the powers that the clause grants.

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

Clause 47 makes changes that ensure that the status of EU law in relation to excise is clear. The European Union (Withdrawal) Bill lays out the Government’s general approach to EU legislation after EU exit. We need to ensure the consistency and certainty of the existing excise and VAT regimes to ensure that they work effectively after exit.

Excise is an important contributor to national revenue—receipts for 2016-17 were around £48 billion—so it is important that we have clarity on the rules, including the status of EU law in relation to excise. The approach adopted by this clause is consistent with the European Union (Withdrawal) Bill. It results in EU legislation being retained only where it is sensible to do so in respect of excise. There is a similar provision for VAT in clause 42.

Clause 47 disapplies EU regulations in relation to excise duty on goods along with directly applicable EU legislation linked to those regulations. In the main, the regulations relate to single market reciprocal arrangements, for example exchange of information for the excise movement and control system. In the absence of a negotiated agreement, they would be deficient after EU exit.

Removal of EU legislation that is no longer required is anticipated in the withdrawal Bill. The powers in clauses 45 and 51 would enable us, among other things, to re-introduce EU regulations where necessary with or without modifications, for example in the light of a negotiated agreement with the European Union.

In line with the European Union (Withdrawal) Bill, the clause confirms that rights and obligations recognised and available before exit day in domestic law will continue to apply for excise, but those rights and obligations that are no longer considered appropriate or relevant for excise may be disapplied by regulations. For example, that would include rights and obligations that relate purely to membership of the EU.

The clause also confirms that other provisions of the European Union (Withdrawal) Bill apply, in particular clause 6 in relation to interpretation of retained EU law. Excise policy has been developed through European case law, including through application of that case law in the UK courts, so UK policy and case law are intrinsically linked. It puts beyond doubt that EU principles and case law determined before EU exit will continue to apply when interpreting domestic legislation on excise goods that have an EU source.

Amendment 134 seeks to limit the duration of the delegated power under clause 47 to the period ending two years after the United Kingdom leaves the European Union. It is one of a number of amendments to time-limit powers across the Bill. As members of the Committee are aware, the Bill is drafted to cater for a variety of long-term outcomes from negotiations on the future relationship with the EU. It is essential that we have a fully functioning excise system on exit. The powers in clause 47 have a part in ensuring that we have the ability to achieve that. As we do not know the outcome of the negotiations, nor exactly when the final outcome of the negotiations will be confirmed, it would not be prudent to time-limit these powers at this stage. For those reasons, I urge the Committee to resist the amendments.

Clause 50 introduces schedule 9, which makes changes to excise primary legislation in connection with the UK’s withdrawal from the EU. Those mainly introduce housekeeping changes reflecting the departure of the UK from the EU, including changes to the Customs and Excise Management Act 1979, the Hydrocarbon Oils Duties Act 1979 and the Tobacco Products Duty Act 1979. These changes are needed to ensure that we have an operable excise regime on leaving the EU.

Several excise directives govern the rules on excise duty on goods in EU member states. In the UK, they are largely implemented through secondary legislation, but some obligations under EU law have been transposed into excise primary legislation. Changes are needed to reflect the departure of the UK from the EU, for instance to remove references to member states’ laws and to adapt definitions. The changes made by clause 50 and schedule 9 are, to a large extent, conditional upon the outcome of exit negotiations. They are there to ensure that we have an operable regime upon withdrawal.

Among other changes, schedule 9 also includes provisions for the Treasury to set out in regulations definitions for private pleasure flying or private pleasure craft. There is no intention to change the meaning of the definitions. Instead, the changes would merely write the definitions directly into UK legislation rather than their being dependent upon EU legislation.

Clause 49 gives the definitions of excise duty and HMRC commissioners in relation to this part of the Bill. A number of taxes are known as excise duties and this clause defines the term “excise duty” and “HMRC Commissioners” for the purposes of clauses 44 to 48. It ensures that the substantial powers in part 4, which covers excise, go no further than necessary and relate only to excise duties on goods.

The clause confines the application of clauses 44 to 48 to matters relating to excise duty on goods—alcohol, tobacco and fuels. Those are the excise duties most affected by EU exit. Part 4 therefore does not apply to air passenger duty and the duties on gambling, for example. Those are entirely domestic and so are less affected by the UK’s withdrawal from the EU.

Additionally, the clause defines the term “HMRC Commissioners”. For the operation of part 4, it is necessary to define these terms. The limited definition of excise duty ensures that the provisions in this part go no further than is necessary and relate only to excise duties on goods that are most affected by EU exit. I therefore urge that the clause stands part of the Bill.

Photo of Anneliese Dodds Anneliese Dodds Shadow Minister (Treasury) 3:15, 1 February 2018

I am grateful to the Minister for those helpful clarifications. I note in particular his determination that the provisions should foster continuity with existing provisions in the short term. That seems very sensible. I hope that, even if the Government are not willing to accept Labour’s call for sunset clauses, they will at least take on board our concerns that there must be appropriate ongoing scrutiny of the measures. Above all, they must not go beyond the scope of ensuring that there is an operable regime following whatever negotiations they have.

Many of those areas are very important for our constituents. I am sure that the Minister will remember the discussion that we had around tobacco excise recently in the Finance Bill. I had concerns about the stripping away of public health support for people to stop smoking, at the same time that duties are going up, and about the implications there might be for low-income people. We need to make sure when there is a fundamental change that we have the ability to properly debate and discuss it in the House. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 47 ordered to stand part of the Bill.

Clauses 48 to 50 ordered to stand part of the Bill.

Schedule 9 agreed to.

Clause 51