Taxation (Cross-border Trade) Bill (First sitting)

Debate between Mike Hill and Douglas Chapman

Tuesday 23rd January 2018 Public Bill Committees

[Douglas Chapman (Dunfermline and West Fife) (SNP)]

Q I would like to ask an additional question. In the previous session we heard that, for example, in terms of SMEs, 130,000 small businesses would be affected by this kind of legislation for the very first time. Does the panel have a view on the particular challenges that the Bill might bring to small business and its impact, especially if Mr White’s book has to be trawled through every time some decision has to be made? What is the panel’s view on that?

Barbara Scott: I work a lot with SMEs who currently find it very hard to understand the Community legislation on customs and international trade law. It is complex and there are a lot of different strands to it. Trade is complex. Things are different depending on what you are doing, whether coffee from Colombia or bicycle parts from China. The legislation and the effect on business is very different, unlike other laws, such as VAT or corporation tax, which generally impact in the same way on most businesses.

This is a huge step change for SMEs and particularly for those who have only traded within the EU. It will be a tough challenge for HMRC to reach out to those people, get them involved and explain how the new legislation will work. There is clearly going to have to be a lot of propaganda and information out there. It is a huge challenge for the state.

Jeremy White: And there is a cost. The SMEs will have to employ agents, because they will not be able to employ in-house staff. I have been told that SMEs will sell out to someone who does have the assistance. The only frictionless trade known to man is customs union. Anything else is costly and can only be managed—just—with all the simplified procedures of the UCC in operation, plus all the information systems that are there to support them. That is big money.

Barbara Scott: When we talk to customs about this, we are constantly hearing, yes, they are being given more resources and will be employing more staff, but can business afford to do that—suddenly to employ new people and understand these new processes? It is a huge cost. People ask, “What is that cost?” It is very difficult to measure. I do not think anyone has attempted to do so yet. It will be a very difficult time for SMEs in particular.

Sue Davies: I cannot comment on SMEs but I want to make the point that if there are additional costs for businesses, they will feed through and lead to increased prices for consumers. That is why it is really important that we have as efficient a system as possible, which still maintains the right level of protection for consumers.

[Mike Hill]

Q I shall ask a question on behalf of my colleague, Grahame Morris, who has lost his voice. He has not lost his question. His voice is somewhere in Dover. Do you have any concerns that the Bill may create opportunities for tax avoidance or evasion?

Jeremy White: Uncertainty always produces that, doesn’t it? A little bit of background: all my professional life has been using EU-type rules, EU language and structure. Through all its iterations—when I was a Government lawyer working on the implementation of the Community customs code, then when we began to do work on the Union customs code, then I went back to practice—it is still very similar. It is well known that the opportunities for avoidance are few. There have been some, obviously, in terms of customs valuation. There have been customs valuation schemes in the past. Most of them have been dealt with.

This is just an example—we do not know, and it could be handled very well—but in a recast there is always an opportunity of bringing in some uncertainty. Is this exactly the same provision as we had before? Will it prevent a customs valuation scheme? The answer to that is that we do not know because all we have seen in the Bill is a very small, framework principle rule provision, but it still does not adopt exactly the language of the World Trade Organisation customs valuation agreement. That would be beneficial—that is another point in our report. The way it works is this. All the customs authorities in the world are obviously interested in preventing evasion and avoidance. They have their own legislation, they have got together for a world agreement on how customs valuation should be—taxation based on movements of goods—that is adopted generally, and their Supreme Courts have ruled on it for many years now, or at least since everyone adopted the same since 1994. We have all that body of work, help and certainty. If we then have an English law recast that abandons that language, we do not take the benefit of leveraging off of any of the international law or any of the international judgments.

The answer to your question—that was really all background—is that we do not know until we see what the statutory instrument looks like, if we still go down this road. It would be better not to, but if we do still go down the road of the recast for all purposes, we will see what the statutory instrument says. I would have thought that the advice will be that the statutory instrument has to adhere to the WTO customs valuation agreement.