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Mr. Davey: My point was that group relief in other areas of the tax system and tax legislation tends to be provided for by primary legislation. Therefore, there is no parallel with this provision. I wanted the Government to explain their thinking. Because this proposal was made in a hurry, I can understand why it will be made through regulation, but I hope that it does not set a precedent. One normally wants group taxation to be provided for by primary legislation.
Mr. Letwin: In that case, I agree with the hon. Gentleman. In due course, the proposal should be put into statute. However, can he and I not agree that it would be better to assess experience and to understand what the rules should be before we enact the measure? It is right that there should be some rules, but they need to be in regulations at the outset. However, we hope--next year or the year after--to put them into statute.
Dawn Primarolo: I intend to follow in the spirit of agreement that has broken out. If the hon. Gentleman reads the provisions of the proposed new section 806H(3), he will see that the regulations made under 806H(1)
Mr. Davey: I did not wish to make this a major issue. I was merely trying to make sure that the Government realise that they have approached group relief arrangements differently from the way in which they have dealt with other tax legislation. I understand that there are special circumstances and I am sure that the Government are right to wish to consult on the detail. That is why I shall certainly not vote against the amendment.
I return to the point that I may not have been making terribly well. I mentioned Dutch mixer companies and capital gains tax liabilities on the sale of subsidiaries. If such companies move onshore into UK mixer companies, will the Government introduce measures for CGT relief on the sales of the overseas subsidiaries of the UK-based onshore mixer companies? It is possible that I have not understood the point properly, but I would be grateful if the Minister could try to explain it to me.
Mr. Davey: The Paymaster General may be right, but I have been led to believe that some mixer companies have subsidiaries; Dutch mixer companies have had subsidiaries. The way in which those companies are constructed is often complicated. The complexity is not necessarily driven by tax reasons. I should be grateful if the Paymaster General reflected on that when she replied to the debate.
Does the Paymaster General have a forecast or estimate of the expected yield of the proposals? We heard a range of forecasts for the expected yield of the original proposals. The Government have spent much time on the matter, and I wonder whether the Paymaster General could tell the House the expected revenue yield, or whether no Exchequer gain is expected from the proposals.
When the Government propose major changes to the tax system in future Finance Bills, I hope that they will have learned lessons from this year and that they will abide by their code on consultation. If they do that, we will not again get into the current mess over double taxation relief.
Dawn Primarolo: I shall reply briefly to the points that were made by the hon. Member for West Dorset (Mr. Letwin), my hon. Friend the Member for Brent, North (Mr. Gardiner) and the hon. Member for Kingston and Surbiton (Mr. Davey). I am sure that hon. Members who have spoken will agree that it is especially important that none of my comments add uncertainty to an extremely complex aspect of taxation. They will therefore forgive me if I do not respond as fully as they would like to some of their points.
We are considering large companies making decisions about their structure and about their best interests in maximising the benefits that are available in, for example, the new arrangements for onshore pooling. I shall therefore be careful about what I say on that.
The hon. Member for West Dorset mentioned drafting. I hope that it will be possible to clear up several points in the guidance so that, for now, at least the guidance will be clearly understood by the Revenue and the relevant companies. The hon. Gentleman also mentioned withholding tax. I have considered the point that he made and I examined the January 2000 KPMG corporate tax survey. It considers corporate tax rates and withholding, if it exists. I am not surprised that the hon. Gentleman picked the one place where the combination of withholding and corporate tax might create a higher level than the 45 per cent.
Mr. Letwin: I mentioned two places: Tokyo and New York. I feel more confident that I am right about New York than about Tokyo. However, will the Paymaster General admit that New York is not any old place? It is where the largest number of major subsidiaries of UK-based multinationals are located. The point that I made is therefore of some importance.
The hon. Member for West Dorset also mentioned company structures. He concentrated on the United States preferred company structure as opposed to that in the United Kingdom; the flat structure that the US operates rather than what could be described as a chain structure. The hon. Gentleman mentioned costs in the US. A company may consider it necessary to move the US company so that it has a completely flat structure, which would relate to the UK, to maximise the benefits. That would entail costs. The relevant company would have to consider the benefits of restructuring its operations. That would be a commercial decision for the company, which would have to balance the costs of restructuring with the benefits that might accrue from it. Companies are already doing that in terms of the acquisitions of US-UK groups. We are considering vast companies. The decisions are always complex and involve vast amounts of money and much consideration.
The hon. Member for West Dorset kept saying, "if there is a real problem". I do not deny that restructuring will involve costs for some companies. I do not believe that that is a real problem in the way in which the hon. Gentleman suggests, although, as with any legislation, the Government have to be watchful about its operation. We have an annual opportunity to consider whether the measure is operating correctly and to remedy it if not. We are considering complex matters, which we will supervise closely.
I am not currently attracted to helping with transitional costs. The benefits to the companies of being linked directly to the UK are enormous. Apart from the 45 per cent., there is the carry-back of three years to offset a liability, indefinite carry-forward and the ability to surrender to another company in the group for use against uncapped lower dividends. Holding those assets directly is greatly beneficial to the company and the UK economy.
Mr. Letwin: I accept that the carry-back and carry-forward provisions, and the relief provisions in general, may be attractive. Will the Paymaster General at least give us an assurance that, if representatives of major multinationals with their headquarters in the UK wish, they will have the opportunity to see her or her senior officials to explain the tax consequences, as the year progresses, in the US, or north America generally, of restructuring so that sub-subsidiaries of current Dutch BVs--limited companies--and other vehicles are brought under the direct ownership of the UK headquarter company? Will she assure us that she will consider those representations seriously and take them into account when drafting next year's Finance Bill?