Draft Double Taxation Relief (Mauritius) Order 2018 Draft Double Taxation Relief and International Tax Enforcement (Cyprus) Order 2018

Mark Francois Excerpts

Monday 18th June 2018 General Committees

[Mr Mark Francois (Rayleigh and Wickford) (Con)]

May I, too, say what a pleasure it is to serve under your chairmanship this afternoon, Mr Robertson?

Like my hon. Friend the Member for Beckenham, I am making a special guest appearance here today in order to raise the issue of service veterans. I managed to give at least brief private notice to the Financial Secretary of my intention to do so.

It is a fact that many veterans and, indeed, other former public sector workers living in Cyprus have been taxed for many years at a rate of 5%. It is important to bear in mind that these people have served their country, and many of them subsequently married local girls and settled down in Cyprus, in some cases to raise a family. Not unreasonably, they have made their financial plans on the basis that they would continue to pay the local tax rate of 5%, to which they have become fully accustomed. For those people suddenly to have to adjust to a tax rate of 20% or perhaps in some cases a marginal rate at 40%—so, eight times higher—will be quite a considerable adjustment.

[Bob Stewart]

You will forgive me, Mr Robertson, for intervening on my right hon. Friend, but the fact of the matter is that I have an interest and I declare it. A very good friend of mine was at the Joint Service Defence College with me. He was a Royal Navy officer and he has contacted me to say that because of this change, he has no option but to return to my constituency. I welcome him back, but the fact is that that is a very big change in his life as a consequence of this change in the tax regime, if it comes about.

[Mr Francois]

I am sure that my hon. Friend is always trying to look after his constituents, both old and new. Nevertheless, that is a valuable example of the change that this measure could mean. If someone has been living in Cyprus for some period of time and has to return to the United Kingdom for tax reasons because of this change, that shows that it is not a merely immaterial alteration.

We should bear in mind the very practical point that recent movements in the exchange rate between the pound and the euro have only compounded the challenge for people who are paid their pensions originally at the sterling rate and have to convert that into euros.

I will ask the Minister some specific questions and then ask for a favour. My first specific question is, assuming that the tax treaty comes into force fairly shortly, in what tax year would the new arrangements arise? In other words, would these veterans be charged at the new rate of 20% or more in the current tax year—2018-19—or would it only cut in, as it were, in a full tax year, in 2019-20? For anybody who is looking to plan, that is an important piece of information that, understandably, they want to know.

Secondly, given the scale of this change, has the Department considered any transitional arrangements, perhaps phasing it in, in some way, over several years to give people time to adjust? As I am sure the Minister can appreciate, what some of these veterans would like is for the Government to reconsider this whole decision, and I can well understand why they would make that case. I can make that plea on their behalf but, knowing a bit about how government works, I suspect that the Minister is not going to give them great joy on that point. What I am seeking to do, therefore, as I am sure the Minister, who is a reasonable man, can understand, is to say that if the Government are determined to go ahead with this change, which I suspect they are, could they at least try to ameliorate it in some way, to give people who have planned for a number of years on one basis—perfectly reasonably—a little more time to adjust to having to plan for themselves and their families on an alternative basis?

Bearing in mind that these are people who have served their country loyally, will the Government in return, as my hon. Friend the Member for Beckenham and I very much wish—as, I suspect, do other members of the Committee—give a little bit of acknowledgment of the good service of those people in the past? I look forward enthusiastically to the Minister coming up with at least something out of his back pocket.