Collection of exporter information by HMRC

Trade Bill – in a Public Bill Committee at 5:45 pm on 30 January 2018.

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Photo of Bill Esterson Bill Esterson Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (International Trade) 5:45, 30 January 2018

I beg to move amendment 26, in clause 7, page 4, line 32, leave out subsection (1) and insert—

“(1) The Commissioners of Her Majesty’s Revenue and Customs may, by regulations, request any person to provide, or make provision authorising officers of Her Majesty’s Revenue and Customs to disclose, prescribed information for the purposes of assisting the Secretary of State to establish the number and identity of persons exporting goods and services from the United Kingdom”.

This would ensure that, where HMRC already has this information, it may be shared with the Secretary of State.

With this, it will be convenient to discuss the following:

Amendment 27, in clause 7, page 4, line 38, at end insert—

“(2A) For the purposes of subsection (1) “prescribed information” means the names and addresses of persons who have exported goods covered by a prescribed code.”

This would ensure that the information to be collected pertains only to exports recognised as such for official purposes, in line with the Small Business Enterprise and Employment Act 2015.

Amendment 28, in clause 7, page 4, line 38, at end insert—

“(2A) For the purposes of subsection (2A) “prescribed code” means the commodity code or other identifier applied to a category of goods or services in connection with the preparation of statistics on exports from the United Kingdom (whether or not it is also applied for other purposes).”

This further qualifies what “prescribed information” means.

Amendment 29, in clause 7, page 5, line 3, at end insert—

“(3A) Regulations under subsection (1) may not make provision that could be made by regulations under section 10 of the Small Business Enterprise and Employment Act 2015.”

This would avoid duplication, in respect of the collection of information from exporters, with the Small Business Enterprise and Employment Act 2015.

Amendment 32, in clause 8, page 5, line 17, leave out from “trade” to end of line 19.

This would remove the power granted by the Bill to Her Majesty’s Revenue and Customs, or anyone acting on their behalf, to disclose information on United Kingdom exporters to any public and private body within or without the United Kingdom.

Photo of Bill Esterson Bill Esterson Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (International Trade)

We recognise that it is essential to the efficient performance of the Department for International Trade and to the future delivery of trade policy that the Government have access to appropriate information about our imports and exports. We are also very aware of the impact on businesses, particularly small and medium-sized enterprises, of any increased burden in administration and mandatory reporting.

Clause 7 seeks to ensure that the Secretary of State may have access to such information, as collected by Her Majesty’s Revenue and Customs, that would establish the number and identity of exporters. What exactly the information is that will be required is not disclosed and the clause does not limit HMRC in terms of what information may be sought, only setting out that the information may be used for

“the purpose of assisting the Secretary of State” in his endeavour. HMRC could, in theory, use the power to request significant volumes of information that might be subsequently determined not to be needed for the purpose of assisting the Secretary of State, but that none the less requires disclosure under this provision.

This is not a trivial matter. Businesses and business organisations have expressed their concern about the provision, because much of this information is already collected by HMRC and businesses do not want to have to provide it more than once, because of the time that that would require and the impact it would have on their day-to-day operation.

That prompts the question of why powers must be awarded that would replicate that which is already being done. If existing legislation does not provide for the Secretary of State to access this data, one may very well understand the need to stipulate that such information may be shared with his Department. However, if such information exists already, the burden should not be put on businesses to furnish the same information in a different format, simply because of a failure to collate the information that is already in the possession of Government Departments or agencies.

That is why we tabled amendment 26, which would allow the Commissioners for Revenue and Customs to authorise their officers to disclose such information to the Secretary of State for the purposes described in the Bill, and amendment 29, which would prevent the potential creation of duplicate or conflicting regulations.

Amendment 29 recognises that section 10 of the Small Business, Enterprise and Employment Act 2015 contains provisions on the disclosure of exporter information by HMRC. SMEs are, after all, the backbone of our economy and we should encourage them to increase exports and not bog them down with tax forms and administration that may put some businesses off exporting.

Currently, much of the information is contained in the various documents and forms that must already be furnished to HMRC. For example, there is mandatory Intrastat reporting, which requires goods exporters to submit on a monthly basis details of goods and exports within the European Union, subject to minimum annual thresholds. Of course, that measure is enforceable by the European Union, but perhaps the Minister will confirm whether it will continue to be enforceable under the terms of the European Union (Withdrawal) Bill. I imagine a note will wing its way to him about that shortly. [Interruption.] He already knows—impressive. There is always a first time.

Similarly, VAT-registered exporters are required to supply HMRC with EC sales lists that detail their EU customers, the respective country codes and the value of goods supplied to them. On top of that, customs declarations must be made that record product codes, transport modes, duties levied and other relevant information for the purposes of accumulating information on the number and identity of exporters.

The much-trumpeted new customs declaration service will allegedly be operating by March 2019. Will the Government be incorporating this reporting requirement into it, or will additional systems be needed? In other words, how does the Minister intend to avoid duplication? HMRC has already acknowledged that there is a risk that the new customs declaration service is unlikely to be in place by exit day, so it will be phased in, which will result in limited functionality and scope when launched. That prompts the question about whether the new customs declaration service will be geared up in time for the reporting requirements of the Bill. Will the Government consider additional resources for HMRC to carry out additional duties for all these additional reporting requirements?

Our amendments recognise that where such information may not otherwise be available, regulations may be passed to require other persons to disclose it. However, the Government must clarify whom the Commissioners for Revenue and Customs may so instruct. The provision is extremely vague and potentially awards sweeping powers to HMRC to request information from persons entirely unconnected to an exporter or indeed trusted agents and advisers who might otherwise be bound by a duty of confidentiality.

Clearly, as some of our witnesses suggested, many existing reporting obligations are applicable to the export of goods rather than services. That gap needs to be addressed. Unlike goods exports, which have commodity codes for export purposes, there are not the same proper definitions and appropriate attributable codes for services, which means that it is difficult to determine when a service becomes an export. If the Minister does not have the full detail on that, I will not be entirely surprised, but perhaps it is something for his officials to persist with. The service exports to which these provisions will apply must be qualified, particularly as the definition of what constitutes a service may be vague. Many businesses have significant group operations and may provide services between subsidiaries, which would be treated as intra-group charges. Do the Government intend to inflate service export figures by including those details?

Amendments 27 and 28 are designed to prevent services that should not or would not be considered to be exports from being considered such by requiring that only exports with appropriate codes and identifiers can be considered for those purposes; that includes new codes where needed. However, we also recognise and welcome efforts by HMRC to tackle abusive transfer pricing and aggressive tax planning. Can the Minister tell us whether HMRC will use that information for such purposes in addition?

Photo of Greg Hands Greg Hands The Minister of State, Department for International Trade 6:00, 30 January 2018

I thank the hon. Gentleman for his set of questions, which I will answer as far as I can. Let me start with why we need the data collection and sharing powers.

It is important that the Government have a more comprehensive understanding of UK exporters. The powers will allow the Trade Remedies Authority to fulfil its function by using full and proper data on the UK business population. They will also equip my Department with robust data to develop trade plans globally, and help us better to understand the impact of future trade agreements and policies so that we can direct our resources appropriately. Ultimately, that will provide better value for money for the taxpayer by enabling more targeted approaches to Government intervention and support for existing and potential exporters.

Clause 8 sets out the powers necessary for HMRC to share the data with the Department for International Trade and other Departments and organisations, for those bodies to carry out their public functions related to trade. I will come to the points raised by the hon. Gentleman in a moment, but those powers need to be wide enough to be able to withstand future institutional developments, so the clause will also allow HMRC to share the data with, for example: other bodies that DIT sets up to cover specific functions, such as the Trade Remedies Authority; bodies that carry out a public trade function, to ensure that the UK is able to put in place and maintain an independent trade policy as we leave the EU; and bodies outside the United Kingdom, such as the World Trade Organisation, with which the UK will be obligated to share data as part of our international obligations. That is currently done through the European Union; there is no change to the effect of that provision.

Amendment 32 would restrict the Government’s ability to take on functions related to trade formerly carried out by the European Commission, such as those related to trade remedies. You will know, Ms Ryan, that the European Commission currently does trade remedies investigations, a lot of which are data-driven. The amendment would hinder our ability to take such a data-driven approach ourselves.

Amendment 26 duplicates in clause 7 the necessary data sharing powers already set out in clause 8. Looking ahead to this country leaving the European Union, the amendment’s requirement to seek HMRC commissioner approval before any data is shared would also restrict the Government’s ability to share data at speed. It may be necessary, for example, to share data with the Trade Remedies Authority quickly or immediately when dealing with a trade defence case. I would not want the Trade Remedies Authority to be prevented from taking urgent action—sharing data about an important trade remedy quickly and efficiently, for example—in relation to a sector such as steel or ceramics because the Opposition had imposed an artificial delaying power with their requirement to seek HMRC commissioner approval before any data is shared.

Photo of Faisal Rashid Faisal Rashid Labour, Warrington South

I understand what the Minister says about speed and things that have to be done, but many businesses, particularly small businesses, often struggle to stay on top of their reporting and administration requirements. There is a risk that any increased burden on them could put them off exporting. How do the Government intend to collect this information while ensuring that they do not place an unfair burden on small businesses?

Photo of Greg Hands Greg Hands The Minister of State, Department for International Trade

First, in the long run, small businesses will benefit from the Government being informed by a full set of data on the exporter community. It is difficult for the Government to set policy in relation to exporters without having a full picture of how many exporters there are and in which sectors. In the medium to long run, our ability to collect that data would help small businesses considerably. Secondly, the provision of that data will of course be voluntary. If a small business did not want to participate, for whatever reason, it would not be compelled to do so. It is very important to recognise that.

Photo of Anna McMorrin Anna McMorrin Labour, Cardiff North

What does the Minister intend to do with the information that is collected? Also, what international bodies do the Government believe that information—much of which may be commercially sensitive —should be shared with, and why should they require such data?

Photo of Greg Hands Greg Hands The Minister of State, Department for International Trade

On the international bodies, I refer the hon. Lady particularly to the WTO, with which we are actually obliged to share a lot of that data. Much of that data sharing is currently done through the EU, but once we are outside the EU we will be obliged to share that data with the WTO on a stand-alone basis. Domestically, sharing a lot of the data with the Trade Remedies Authority will enable it to be well informed as it looks at the impact of alleged dumping on UK domestic industry, which is, after all, the purpose of the TRA.

I will take an intervention from the hon. Member for Warwick and Leamington. [Interruption.] Oh, he had the same intervention.

Photo of Greg Hands Greg Hands The Minister of State, Department for International Trade

It is good to see people thinking similarly. Sharing data quickly and immediately may be necessary for, as I say, the TRA dealing with a trade defence case, or where data is immediately required in a fast-moving future trade agreement negotiation.

Clause 7 sets out the powers needed for the Government to collect data to establish the number and identity of UK businesses exporting goods and services. Amendments 26, 27 and 28 would narrow the ability of the Government, both now and in the future, to determine what data we wish to collect and how we may collect it. The Government should retain the ability to determine in the future what relevant trade information they may need to request from businesses, although I stress that providing that information is voluntary. At this time, we are not able to anticipate precisely what those needs will be.

On some of the individual points, I think the hon. Member for Sefton Central claimed that HMRC is unrestricted in what data it can source. I stress that the power in the Bill is to request information. The Treasury will specify what information will be requested, and will do so by regulations that will come before Parliament. There is no obligation on businesses to provide that information, although we say, and strongly believe, that it is in their interests to do so, to help to inform the Government’s export policy.

On additional resources at HMRC, I rather feel that that might be a debate for another day in another place. However, the resources given to HMRC post Brexit to deal with Brexit are already there. Various announcements have been made by the Chancellor of the Exchequer and the Chief Secretary to the Treasury over the last 18 months on that. I point out that the power has been assessed and its likely cost looked at. It has been deemed to be relatively inexpensive and overall will not add a cost burden on HMRC.

On inflating exporter numbers, I do not think that that would be accurate. The hon. Gentleman seems to think that there is some kind of Government plot to artificially boost the number of exporters, so that we can suddenly say what a great job we have done because the number has gone up. No—the purpose of collecting the data is to have an accurate picture of the number of exporters. For example, we know there are 5.7 million private sector businesses in the UK. HMRC collects export data from 1.9 million VAT-registered businesses. There are 2.2 million VAT-registered businesses in the UK. We therefore think that the Government do not collect any export data from about 4 million UK businesses. That is what we want to do. Our analysis suggests about 300,000 businesses in the UK could and should export but do not do so. The key is to find where those businesses are and encourage them to export, so that the UK does a much better job on exports.

The hon. Gentleman asked whether Intrastat will continue. When the UK leaves the EU, Intrastat will not be applicable for exports and will not continue in this case. Finally, there were questions relating to the interaction with the Small Business, Enterprise and Employment Act 2015. Similar to my response to amendments 26 to 28, the Government should retain the ability to determine in the future what relevant trade information they may need to request from businesses. At this time, we are not able to anticipate that precisely, but I have given some indication of the sort of areas we might look at and what all those needs would be.

Amendment 29 refers to powers in section 10 of the 2015 Act. Those powers relate to disclosure of existing exporter information by HMRC officials and therefore are not directly relevant to the powers in clause 7 relating to the collection of data. In other words, it is different data. Bearing all of this in mind, I ask the hon. Members not to press their amendment.

Photo of Bill Esterson Bill Esterson Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (International Trade)

I thank the Minister for his answers. I was puzzled by one thing. Why does the Bill not specify that the data would be for sharing with the Trade Remedies Authority if that is the primary purpose in collecting it at this point? He says there will be other organisations, but it is a bit odd that the Bill does not say as much.

Our concern—a concern that comes from business—is about giving HMRC the power to request. That is an interesting phrase. Anyone who has had any dealings with HMRC as a business tends to experience that as a fairly strong power to request. If we asked most people who run businesses, they would say it is a bit more than a power to request; they interpret it as not having any choice in the matter. That is one of our big concerns, and I hope the Minister will take that on board.

The Minister made the point that this is about the medium to long run and there will be improvements for smaller firms over that period. By implication, that leaves out the short term. I would welcome a brief intervention to confirm the implication I gathered from what he said—that there may be a hit or an increase in the demands and burdens on smaller firms while the new system is settling down. I will give way to him if that is what he thinks is going to happen.

Photo of Greg Hands Greg Hands The Minister of State, Department for International Trade

I thank the hon. Gentleman for allowing me to intervene. I do not accept that there will be an increase in the burdens for anybody involved in this process, because it is a voluntary and essentially very limited process. I would say to him that the data could be extremely helpful in informing Government policy, and that is why he should withdraw his amendment.

Photo of Bill Esterson Bill Esterson Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (International Trade)

I am grateful for that clarification. We are keen to avoid unnecessary reporting requirements and an adverse impact, especially on smaller firms, as this country needs them to do well in trade and exports. We are supportive of the right approach and the right level of data collection in achieving such an objective. In that spirit, I will not press amendments 26 to 28. We will press amendment 29 to a vote because we still think it is important to avoid the duplication of powers in the 2015 Act. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: 29, in clause 7, page 5, line 3, at end insert—

“(3A) Regulations under subsection (1) may not make provision that could be made by regulations under section 10 of the Small Business Enterprise and Employment Act 2015.”—

This would avoid duplication, in respect of the collection of information from exporters, with the Small Business Enterprise and Employment Act 2015.

Question put, That the amendment be made.

The Committee divided:

Ayes 9, Noes 10.

Division number 30 Caledonian Pinewood Forest — Collection of exporter information by HMRC

Aye: 9 MPs

No: 10 MPs

Aye: A-Z by last name

No: A-Z by last name

Question accordingly negatived.

Photo of Bill Esterson Bill Esterson Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (International Trade) 6:15, 30 January 2018

I beg to move amendment 30, in clause 7, page 5, line 4, leave out subsections (4) and (5).

This would remove the Henry VIII power allowing for the modification of an Act of Parliament in respect of the collection of exporter information.

With this it will be convenient to discuss amendment 31, in clause 7, page 5, line 10, leave out subsection (6) and insert—

“(6) Any statutory instrument containing regulations under subsection (3) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.”

This would require Treasury regulations that make provision for exporters to supply information on their exports of goods or services to be subject to the affirmative resolution procedure.

Photo of Bill Esterson Bill Esterson Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (International Trade)

The amendments would remove yet more Henry VIII powers, this time bestowed on Her Majesty’s Revenue and Customs and allowing for regulations to be made that may modify primary legislation. Using the powers, HMRC may change the nature of the information being sought under the regulations and the persons from whom such information may be requested, such that the resultant requirements on business may ultimately be substantially different from the scope implied under the clause. We are entirely opposed to the use of Henry VIII powers, as we have repeatedly said, and we do not believe it appropriate that any agent of Government has the powers to amend primary legislation by way of secondary legislation.

Amendment 31 would ensure that any regulation to which clause 7 applied must be subject to the affirmative procedure in this House, giving Parliament the proper opportunity to scrutinise any changes. There can be no good reason for allowing Henry VIII powers or the negative procedure to be used in those circumstances. I mentioned in my speech on the previous group of amendments the Small Business, Enterprise and Employment Act 2015 but it is worth drawing the Committee’s attention to section 10 of that Act, in particular subsection (6), where such regulations are subject to the affirmative procedure. Logic and consistency might suggest that that would be appropriate in this Bill too. Perhaps the Minister will explain why that was appropriate in the 2015 Act but is not in this one, despite the similar circumstances. In advance of the 2015 Act, HMRC published an explanatory memorandum on the use of the powers, noting that such information could well be sensitive and thus recognising a need to limit the scope of the information collected and subsequently shared:

“This is deliberately tightly drawn and specifies the categories of information that may be disclosed under the regulations, and is limited to less sensitive but nonetheless useful information.”

That brings us to amendment 32, which would remove HMRC’s power to share the information freely with other bodies or institutions, whether in the United Kingdom or overseas. We recognise the need to accumulate comprehensive statistics. We are mindful of the evidence from our witnesses, Professor Alan Winters of the UK Trade Policy Observatory and Anastassia Beliakova of the British Chambers of Commerce, both of whom called for the greater sharing of information. However, that is not the same as calling for the sharing of commercially sensitive information. In the light of HMRC’s explanatory memorandum to the 2015 Act, such sharing must be subject to limitations to prevent sensitive information from being shared freely.

Order. We debated amendment 32 under the previous group of amendments and are now debating amendments 30 and 31. The hon. Gentleman needs to confine himself to comments on those amendments. I hope that is helpful.

Photo of Bill Esterson Bill Esterson Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (International Trade)

Thank you for bringing me back on track, Ms Ryan.

I trust that the Committee recognises the impact that poor application of those powers might have on businesses. It may even result in entirely opposite outcomes to those intended. I look forward to hearing the Minister’s response to such concerns. I hope that he will address my questions about how some of the powers will be exercised and what measures will be put in place to protect our exporters.

Photo of Greg Hands Greg Hands The Minister of State, Department for International Trade

The clause sets out the powers that will enable the Government to establish for the first time ever the number and identity of UK businesses exporting goods and services. HMRC currently collects export data from approximately 70% of the 2.2 million businesses that are registered for VAT. As I said earlier, there are 5.7 million private sector businesses in the UK. That means we do not collect export data from about 4 million businesses. Our data does not include certain sectors, smaller enterprises and many exporters of services.

Why is it important that the Government have a more comprehensive understanding of UK exporters? First, the information will allow the Trade Remedies Authority to fulfil its function using full and proper data on the UK business population. Secondly, it will equip my Department with robust data to develop trade plans globally and will help us better to understand the impact of future trade agreements and policies in order to direct our resources appropriately. Ultimately, it will all provide better value for money for the taxpayer by enabling more targeted approaches to Government intervention and support for existing and potential exporters.

We are not able to anticipate all the data that we might need in future, including for those functions that I have just described to the hon. Gentleman. It is therefore vital that we retain the ability to specify the type of information to collect now and in the future to ensure that the Government are able to discharge fully all relevant trade functions.

Should amendment 30 be passed, it would not be possible to collect trade data through the tax return. We do not know whether the collection of such currently unknown data might, for example, require the modification of an Act of Parliament. I confirm to the hon. Gentleman that at such time as the Government specify what information we wish to collect and how we will collect it, we will return to this House, as is already set out in clause 7(5). I also assure him that any information collected and the way we request it will be done in such a way as to cause minimal cost to Government and business. I therefore ask him to withdraw his amendment.

Question put, That the amendment be made.

The Committee divided:

Ayes 9, Noes 10.

Division number 31 Caledonian Pinewood Forest — Collection of exporter information by HMRC

Aye: 9 MPs

No: 10 MPs

Aye: A-Z by last name

No: A-Z by last name

Question accordingly negatived.

Clause 7 ordered to stand part of the Bill.

Clauses 8 to 12 ordered to stand part of the Bill.

New Clause 3