Draft International Tax Enforcement (Bermuda) Order 2017 Draft Double Taxation Relief and INTERNATIONAL TAX ENFORCEMENT (KYRGYZSTAN) ORDER 2017

Clive Lewis Excerpts

Tuesday 6th March 2018 General Committees

[Clive Lewis (Norwich South) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Hosie. I welcome the opportunity to participate in scrutinising these two tax enforcement orders. Work that has contributed to ensuring that the UK overseas territories have adopted the common reporting standard a year earlier than other parts of the world is to be commended. It is vital that tax that is rightly due is paid and any avoidance promptly investigated and, where appropriate, prosecuted. However, we should be cautious in assuming that tax treaties between wealthy and low-income nations are without problems.

We know that low-income countries rely more heavily on tax revenues than their rich counterparts, and the revenues can be assumed to be more urgently needed to provide public services such as health and education. Treaties have historically been one of the elements of the global tax system that have stood in the way of low-income countries collecting the tax revenue that is fair and just—undermining the ability of local companies to compete on a level playing field. It is therefore vital that we get this right.

With regard to the Double Taxation Relief and International Tax Enforcement (Kyrgyzstan) Order, I ask the Minister why the treaty does not include the provisions against tax treaty abuse that were agreed as minimum commitments by the UK and all states participating in the G20/OECD project on base erosion and profit shifting, also known as BEPS. Those anti-abuse provisions are included in the multilateral instrument on BEPS, and would be imported into a treaty if both parties to that treaty list it as a covered agreement. The proposed agreement with Kyrgyzstan was not listed as a covered agreement by the UK when it signed the MLI in June 2017, although the one with Lesotho, tabled a few weeks ago, was. Are the Government content to proceed with the treaty without ensuring that it contains the anti-abuse provisions accepted as a minimum commitment under the BEPS project?

In addition, why does the treaty not include a provision for the arbitration of disputes in article 24, while the recently considered treaty with Lesotho did include such a provision, despite the fact that developing countries have, through the UN committee of tax experts, opposed inclusion of such arbitration provisions in tax treaties? If the UK is willing to sign a treaty with a country such as Kyrgyzstan without an arbitration provision, why was it included in the Lesotho treaty? Why has there been a delay in bringing the treaty to the House? It appears that the treaty was signed in Bishkek in June last year. Why was it not considered here earlier? Is that a result of the greater than average scrutiny to which the Lesotho treaty was subject?

With regard to the International Tax Enforcement (Bermuda) Order, will the Minister tell us whether the Government have arrangements in place for the automatic exchange of tax information? I think the Minister did mention that, but if he could clarify it once more, that would be really helpful. Finally, the explanatory note to the order states:

“The 2017 Arrangement replaces the 2007 Arrangement and makes provision for automatic exchange of tax information, which was not provided for in the 2007 Arrangement.”

Paragraph 6 of the 2017 arrangement provides for automatic exchange. It states that that will be done under procedures to be determined “by mutual agreement.” The UK-Bermuda agreement of 2014 to improve tax compliance stated that

“the Parties are committed to promoting a new single global standard in the automatic exchange of tax information and will look to align this agreement to that new global standard in due course”.

Has that been done, and can the Minister provide details?