Taxation (Post-transition Period) Bill DebateFull Debate: Read Full Debate
Pat McFaddenMain Page: Pat McFadden (Labour - Wolverhampton South East)
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Provided the treaty itself, and therefore the Act of Parliament that follows from it, maintain the principles I set out in my question to the Secretary of State for Business, Energy and Industrial Strategy yesterday, there is no question as to whether we will be entitled to exercise our sovereignty and to displace European Court jurisdiction and the EU laws, for example—there are many others—on state aid. We will be entitled to do so, but it is a matter of constitutional law and also, as I have explained, international law.
I am afraid that there has been a great deal of assertion that we are so-called potentially in breach of international law, but international law recognises the fact that a country can exercise its sovereign rights to defend its economic interests from a national point of view. In fact, Helmut Schmidt did precisely that in, I think, 1998 over the question of the deutschmark and the dollar. There are many examples, and we have not got time to go into them all today.
I will turn to some of the precedents just to illustrate the fact that it is not such a novel idea somehow or other to use a “notwithstanding” clause or formula, and that applies to all parties, whether that is the Labour party, the coalition, where the Liberal Democrats joined in and voted with us on these matters, or the Conservative party. For example, the Income and Corporation Taxes Act 1988 provides that the parts that diverge from treaty obligations—the language of the section was completely unambiguous—were “notwithstanding anything contrary” to those arrangements set out in the Act. The section was enacted to retaliate against the introduction of unitary tax systems adopted by certain states in the US, most notably in California. I think my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) may know about that.
What I am saying is that such provisions are not exactly unusual. Indeed, in the Finance Act 2013, which was under the coalition, the Liberal Democrats went along with allowing Parliament to effectively write a blank cheque to interfere with international treaties—approximately 130 of them, in fact. That provision is still in force. No one questioned the Chancellor’s right to introduce any such legislation or, indeed, the lawfulness of the work of Her Majesty’s Revenue and Customs, which still relies on it in combating questions relating to such arrangements.
Then there are other precedents. I shall stick to Finance Acts at this juncture as that is what we are dealing with in the context of this particular Bill, which is, of course, a finance Bill. Section 52 of the Finance (No. 2) Act 1945 overrode aspects of the Ireland-UK tax treaty of 1926. I hope I may be allowed a slight smile here, as I look across the Irish sea and consider the position with regard to the Irish Government in relation to the “notwithstanding” clauses, because we actually did this in 1926. The Act was used as an example in a case involving Collco in which the court said that if the statute is unambiguous, its provisions must be followed even if they are contrary to international law. It could not be clearer. The Finance Act 1955 again overrode the Ireland-UK tax treaty. In the Inland Revenue Commissioners v. Collco Dealings, Viscount Simonds said, “The company has no rights under any agreement. Its rights arise from the Act of Parliament, which confirmed the agreement and give it the force of law.”
Section 59 of the Finance Act 2008 excluded UK residents from benefiting from provisions in respect of profits from the trade etc. Then there is the coalition arrangement under the Taxation (International and Other Provisions) Act 2010 where, again, the position was made entirely clear in accordance with the precedents.
Indeed, it is not just the UK, or even a party in the UK, that has been doing this over a period of time in its economic and national interests. An example from 2020 is the European Central Bank’s bond-buying scheme. In May 2020, the German constitutional court sought to override EU law and the Court of Justice, suggesting that the ECB’s public sector purchase programme was unconstitutional. Then there are the bail-outs. Every one of the bail-outs from 2010 to 2015 could justifiably be described as in breach of article 125 of the Treaty on the Functioning of the European Union. I will not read out the details, but I shall give some examples: the first Greek bail-out in 2010; the Irish bail-out in 2010; the Portuguese bail-out, the second Greek bail-out; the Spanish bail-out; the Cypriot bail-out; and the third Greek bail-out in 2015. There are so many examples—whether in the UK, or in relation to other member states, or, indeed, in relation to the EU itself—that have demonstrated that, when it comes to the question of sovereignty and the ability to override treaties, this is done quite often as a matter of course. I am not saying that it is done generally. I am not saying that it happens every week or every day. What I am saying, however, is that it happens and that it happens for good reasons which are directly related to the arguments on sovereignty which I gave at the beginning, and it is not for the unelected House of Lords to tell us. That is why, in this Bill, they would not have been able to do so because of the issue of financial privilege.
I am bringing forward these amendments. I shall decide as we proceed whether I will press them to a vote. I will leave it at that for the moment, because I am more than fascinated to hear the usual Europhile utterings of the right hon. Member for Wolverhampton South East (Mr McFadden) who is about to speak.
Many of the regulations stem from the Taxation (Cross-border Trade) Act 2018. New clause 3 sets out which sections of that Act are referred to in the Bill and changed by it. It asks the Government to publish the new regulations in short order and, in future, to report on their effects. Even if the Government accepted the new clause and agreed with that, however, it would still be difficult for businesses to understand it all before the new year. Is the Minister confident that HMRC has the capacity to process all the applications for authorisation that are now likely to come in from Northern Ireland-based businesses that want to comply with the new rules from 1 January?
As I have already said to my right hon. Friend, without venturing a percentage, the test for at-risk goods is those where there is a “genuine and substantial risk”, and therefore those are expected to be a smaller proportion of goods, but trade of course is a flexible and ever-changing thing, so whatever numbers there are may change over time.
My right hon. Friend also asked a question about the EU. I am not going to speculate on what the EU does, but I can assure him that there will be no EU customs, embassy or the like and no joint control over customs in Northern Ireland. HMRC will remain the tax authority for Northern Ireland, as it is for the whole of the UK.
The Bill also includes new powers that will enable HMRC to raise tax charges under the controlled foreign companies legislation for the period 2013 to 2018. Lastly, to help level the playing field for UK businesses, the Bill also moves VAT collection on certain imported goods away from the border and removes VAT relief on low-value consignments to clamp down on VAT abuse and to protect our high streets.
The Bill gives businesses throughout the UK certainty about the arrangements that will apply from 1 January of next year. Above all, it helps the Government to safeguard what we all prize and desire, or should all prize and desire: the unity and integrity of the United Kingdom. I commend the Bill to the House.
I also wish to thank the Minister and the Opposition Front-Bench spokesperson, the right hon. Member for Wolverhampton South East (Mr McFadden), for the way in which this debate has been conducted, as well as the hon. Member for Stone (Sir William Cash) for his contributions, which were typically detailed. There is one point of detail that I was quite surprised that he missed. I have been saving this up the end, just in the hope that he might have picked up on it. He has waxed lyrical about sovereignty, as he does in every single debate I think he has ever spoken in, but I am quite surprised that he allowed to fly the EU setting the level of taxation on aviation gasoline. The reason that I am quite surprised about that, in the most ludicrous of ludicrous Brexit-based patriotic ironies, is that avgas is the fuel used not just in private and leisure aircraft, as the Minister set out, but in Spitfires, Hurricanes and other similar planes. There is some mad irony in the UK Government handing over to the EU the power to set the taxation on those vintage planes that bear so much patriotism among so many people.
I suppose that it is typical of the Government’s approach to all of this that there is so much detail in the Bill that we cannot possibly see—