Select Committee on European Union Minutes of Evidence


Examination of Witnesses (Questions 400 - 403)

WEDNESDAY 8 MARCH 2000

MR DAVID GRIFFITHS, MS VANESSA MARSLAND AND MR ETIENNE WONG

  400. Can I come back on this for one second? Competition will bring standardisation, and competition of this business is going to be very fierce. So, this idea of where the company is based would lose its meaning over time. I do not think it will have the same effect that other businesses used to have, which was that if you were in Britain there was more confidence in Europe or vice versa. This will disappear because the competition is there, the information is available and those who are cowboys will start disappearing. This argument may not be valid in this business for a long time.
  (Mr Griffiths) It is certainly possible.
  (Mr Wong) From the tax perspective, certainly it is very tempting for a lot of people starting an e-commerce business to locate their businesses outside the EU in, let us say, Jersey. That is, setting the company up in Jersey. If the individual himself continues to manage and control that company and he continues living in the United Kingdom, then, even under existing rules, that would bring the company on-shore for tax purposes. I think at the moment the barrier which stops people moving off-shore en masse is practical considerations. We have certainly come across businesses where the individuals cannot simply decamp and go to Jersey, because of family connections here or, more importantly, because their business connections are here. So, if they become based outside the EC they may not be able to generate as much business.

  Lord Paul: Take a company like Microsoft, they are doing a lot in India because there is absolutely no tax on this business in India. I was surprised to see, the other day, that 28 per cent of the total employees of Microsoft are Indians. More and more companies are going into India, which is marvellous for India, and that is why the Government of India, despite these companies making money, does not want to tax them, but it is the companies here, that keep their business here, but still maintain a lot of business from India or other countries like that.

Lord Cavendish of Furness

  401. I cannot, for the life of me, understand why, in the same way as you have a professional body which both protects you from cowboys and the punter, the services providers cannot have one as well, and a seal of approval which the punter will look for?
  (Mr Griffiths) My Lord Chairman, it seems to me that in order to establish bodies of that nature you have to have businesses that want to get together, that do agree and that share common interests and have the resources to participate in them. It seems to me that given the diversity of businesses participating in this sector and the number of different countries in which they start, it will be difficult for them all to agree on a single body. So, I suspect, to the extent that it can be achieved, you will end up with quite a range of different bodies, and there may be a range of different national bodies as well, which will, in themselves, then start creating and competing on different standards. I am not entirely sure where all that will lead to. I certainly do not want to suggest that I do not think it is a good idea that they should establish self-regulating bodies, I just question to what extent it will achieve universal acceptance.

Lord Chadlington

  402. I am taking away the following view about this debate that we have had this afternoon; this is a global business, and wherever you launch the business, the taxation impediments of doing it in the European Union would encourage me to go somewhere else to do it. Is that fair or not fair?
  (Mr Wong) Purely from a tax perspective, that is fair.

Chairman

  403. I think collectively I owe you an apology for not ensuring that my side was fully briefed as to who you are. It has been a very stimulating and helpful session for us, and we are very grateful to you for coming along this afternoon and kindly answering our questions. Are there any final points which you want to put to us at all?
  (Mr Griffiths) I would like to thank you on behalf of all three of us for the opportunity to come and talk to you about this. I think we have all very much enjoyed it and we certainly hope that our contribution will be helpful to you and enable you to find a way to make it easier for businesses to operate in this field.

  Chairman: Thank you very much indeed.





 
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