Examination of Witnesses (Questions 400
WEDNESDAY 8 MARCH 2000
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
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.
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.
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
Chairman: Thank you very much indeed.