Draft Double Taxation Relief and International Tax Enforcement (Colombia) Order 2017 Draft Double Taxation Relief and International Tax Enforcement (Lesotho) Order 2017

Debate between Mel Stride and Steve McCabe

Wednesday 10th January 2018 General Committees

[Mel Stride]

May I, at the outset, make one thing extremely clear to the Committee? The Government are entirely committed to supporting lesser developed countries. We are one of the few countries in the EU and among the advanced industrialised countries that meets the 0.7% aid requirement. The hon. Member for Oxford East will know that the Taxation (Cross-border Trade) Bill, which is going through Parliament, will ensure that we take into UK law the unilateral preferences that pertain under the European acquis to ensure we provide zero-duty arrangements on a selfless, unilateral basis with a number of countries that need our support. It is important to understand where we are coming from in our overall negotiations and in the arrangements we enter into with the countries that are the subject of this debate.

I will go through some, at least, of the most prominent questions that were asked. There was a rather eye-watering number of them, delivered at rattle-gun speed, and some were quite technical. Although I enjoy the mental gymnastics of these debates—I always enjoy debating with the hon. Lady—I hope she bears with me as I do my best to pick them up. I was barely thinking about some of them when I had two or three more thrust in my direction. I will do my best to cover as much as I can.

The hon. Member for Glasgow East asked who opened the discussions between ourselves and Colombia. It was us, because Colombia is a significant Latin American economy. It is currently going through its accession process with the OECD, and it is expanding its network of double taxation agreements, including with our competitors—other nations around the world. We have always had close and friendly ties with that country, so we approached it. It was willing, and we have now concluded an agreement.

Like the hon. Members for Birmingham, Selly Oak and for Oxford East, the hon. Member for Glasgow East raised the important issue of transparency in the negotiation process. Tax treaties are international agreements that are given effect through law. They are therefore subject to parliamentary scrutiny and debate. Only when both sides are satisfied with the content of a new treaty will it be signed and published. Parliament will then scrutinise the agreement. If Parliament is not satisfied, the treaty will not enter into force. Where these treaties come about, we are in a position to scrutinise them, as we clearly have in some detail in this Committee. Such treaties have generally enjoyed cross-party support to date. It is recognised that they generally have a positive role in creating and enhancing cross-border trade, investment and employment.

The hon. Member for Birmingham, Selly Oak raised an example of the potential use of this arrangement or treaty in the context of tax avoidance. He mentioned Mauritius specifically. Mauritius has now become a signatory to the OECD base erosion and profit shifting project. It is therefore bound by the rules and regulations in that regard. If we look at offshore so-called tax havens—I think that was the expression he used—they are most typically brought into play where double taxation arrangements are not necessarily in place and there is a fear that double taxation may occur. In that sense, so-called tax havens or overseas tax trusts are being used to create a neutral tax space. The overarching point is that the proliferation of double taxation agreements is to be welcomed in that context.

The hon. Members for Birmingham, Selly Oak and for Oxford East raised the important issue of whether we were in some way exploiting Lesotho as a consequence of the agreement. The hon. Lady went into some detail on her bedtime reading. She went back to the 1997 treaty to look at the various rates of withholding tax and so on. The point I would make is that it is not possible for us to impose a treaty on another country, even if we wanted to. It is for the other country to decide when it is ready to enter into negotiations and to weigh up the trade-off between retaining all its taxing rights and possibly limiting those rights to attract foreign investment.

To answer a question that the hon. Member for Glasgow East posed about Colombia, it was Lesotho that approached us to seek a further double taxation arrangement. There were certainly elements within that negotiation where it sought to achieve certain outcomes to which we acquiesced.

The hon. Member for Birmingham, Selly Oak also raised the issue of how the tax treaty will support Lesotho’s development. UK tax treaties are negotiated by Her Majesty’s Revenue and Customs, reporting to Treasury Ministers. DFID is fully supportive of HMRC’s approach. It works with the Treasury on various aspects at various times in these various arrangements. DFID supports the tax authorities in developing countries to increase their capacity to raise revenues, and it works with the Treasury to develop the Government’s tax and development policy. The Government have also set up a specialist tax capacity building unit in HMRC that deploys HMRC staff in support of DFID country offices to provide technical expertise. The point is that, even outside the context of the treaties, the Treasury and HMRC are there alongside DFID in ensuring that we provide support to those countries and recognise the importance that they rightly place on the sustainability and durability of their tax base.

Other Governments have approached the negotiation of treaty arrangements and the process by which they go through Parliament in exactly the same way as we are looking at this today. It is certainly the case that treaties of this nature under the last Labour Government —in the dim and distant past—went through a similar process to that which we are following today.

The hon. Member for Birmingham, Selly Oak raised the important issue of binding arbitration and asked whether it is typical of these kinds of arrangements. In some cases it is; in some cases it has not been. That is because of historical changes that have occurred in this area. The new model agreed under the auspices of the OECD will now make it more normal. The decision taken by Lesotho and ourselves was that it would be appropriate to operate the model set out by the OECD for binding arbitration.

A question was raised about the renegotiation of our existing trade treaties with other nations—those treaties being between the European Union and other countries. It is my understanding that we will not need to do that in the case of those particular treaties.

The hon. Member for Oxford East asked for reports on the effects on the investment and the tax take and so on. Those are immensely complicated questions to answer; it is very complicated to try to assess and determine exactly what the impacts of a double taxation agreement with another country—an agreement with two countries interacting, with all the various externalities that impinge on those circumstances—will be. It is, of course, the British Government’s responsibility to continue to closely monitor those impacts as far as we can. All legal measures, treaties and agreements with other countries are always constantly under review, as the hon. Lady would expect.

[Steve McCabe]

I want to clarify one point on binding arbitration. As I understand it, consultations take place between the Government and various stakeholders and interested parties in preparation for the treaty. I am curious to know whether any British companies made representations that they wanted the binding arbitration clause included. If so, would the Minister tell us who they are?

[Mel Stride]

As the hon. Gentleman will appreciate, that is a highly specific question, which I cannot be expected to be in a position to answer at present. I am certainly happy to get back to him. Typically with treaties of this nature, a number of discussions are held with stakeholders, the overseas Governments concerned and so on. That is one reason why such arrangements take a considerable time to come to a conclusion.

The agreement with Colombia—our first with that country—brings a significant improvement to our coverage of the region and will improve the trading conditions for businesses in both countries and aid the fight against tax avoidance and evasion. We have brought forward a mutually beneficial treaty in the case of Lesotho.

Finance (No. 2) Bill

Debate between Mel Stride and Steve McCabe

2nd reading: House of Commons
Monday 11th December 2017 Commons Chamber

[Mel Stride]

The hon. Gentleman raises an important issue, but these will be matters for the Royal Bank of Scotland. The most important aspect when one considers the Royal Bank of Scotland is clearly that it is brought back to being a fighting-fit organisation, employing as many people as possible as a business, contributing to the Exchequer, and creating value going forward.

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

I am interested to hear the Minister’s confidence about the money he will be taking through the bank levy. How does the money the hon. Member for Dover (Charlie Elphicke) says has been raised so far compare with the amount the taxpayer has already paid to bail out the banks, and how much of that money have we had back?

[Mel Stride]

It is interesting that the hon. Gentleman mentions the amount that was required to bail out the banks, given that it was the then Labour Government who caused the problem that required the bail-outs in the first place. There is a long and detailed history of exactly what happened: we had lax regulation, and the Bank of England was not in a position to regulate the institutions concerned. The hon. Gentleman might like to look up the answer to his question himself and then inform other members of the Labour party of what he discovers.

Paradise Papers

Debate between Mel Stride and Steve McCabe

Monday 6th November 2017 Commons Chamber

[Mel Stride]

My hon. Friend is absolutely right. This is but one further example of making companies criminally responsible where their employees try to facilitate tax avoidance. That is the right way to go and is just another measure the Government have brought in.

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

Does the Minister accept that the scale of aggressive avoidance exposed by these revelations shows that the general anti-abuse rule introduced in 2013 is not working and that what we need is general anti-avoidance legislation so that there is no room for doubt and no room for manoeuvre?

[Mel Stride]

The hon. Gentleman talks about the amount revealed by these disclosures, and I assume he is centring his remarks on the half-hour television programme last night. The reality is that we do not yet know exactly the extent of what will be revealed, which is why HMRC has asked those with the data to make it available—so that we can use it to get on with the job of cracking down on those who might not have behaved as they should.

Ways and Means

Debate between Mel Stride and Steve McCabe

Ways and Means resolution: House of Commons
Wednesday 6th September 2017 Commons Chamber

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

Will the Minister explain how long the Government have been working on this major concession and when he anticipates that there will actually be some change that means non-doms experience the same arrangements as ordinary taxpayers in this country?

[Mel Stride]

The answer to the hon. Gentleman’s question is that that is precisely what this Bill will be achieving. We will be putting an end to permanent non-dom status, so that those who are “deemed domicile” are treated on the same basis for taxation purposes as other residents in our country. Let me gently remind him that his party was in government for 13 years and very little happened then on the issues to which he now professes objection. So we should not be taking too many lessons from Labour on the issue of non-doms.