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If you ask, as I have done, many headhunters about the situation for people who want to come to work in the United Kingdom, they say that, because it is not clear, people are turning down jobs. The noble Lord,
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We should not forget people who go on to contractsoften they may have a five-year or a three-year contract. What I am talking about might be described at one level or another as arbitrage. Sometimes people will be paid in one currency and not in another. Is there a capital gains tax when the euro, if you are paid in it, comes at a higher level? These are serious issues and the accountancy profession is really looking forward to this. As noble Lords know, the charge for matters on this by the senior partner is £1,000 an hour to lay on hands; £500 an hour for the next one; and the girl in the striped skirtwho is really switched on and does the workis paid a lesser amount.
The accountancy bills for this are horrendous. There is an uncertainty which the Government may be able to clear at a later date. I believe that the noble Lord is saying, Yes, let the Liberals go ahead and have their fun. It will not become law and we will be dealing with things at a later date. I still believe that all this should have gone through a committee of both Houses, but I appreciate the determination shown by the noble Lord, Lord Oakeshott.
Lord Oakeshott of Seagrove Bay: I thank the noble Lord for that; he has helped to clarify a point. If the point that he has been making were to apply to 103,000 elected bodies and so on, this would be a taxation Bill. But it is not. That is why it applies to this House. We are talking about this House only and what we do in this House. I did not say that there is no difference objectively between domicile, residence or anything else in general. If it was a general taxation Bill, of course I would accept that. I am saying that there is no difference as far as the effect of this Bill is concerned, because people are just going to pay full British taxes. That is the point. It is not relevant to this Bill, but it would be to a general taxation Bill.
On the question of whether there can be a change following what was said in the Budget, the noble Lord, Lord Hunt, said that the Government have said that they would not revisit it, but the small print of the Budget document states that the regime will not be substantially changed over the next two Parliaments in so far as it affects non-domiciles. The idea that passing this Bill and affecting perhaps a handful of non-domiciled Peers is a substantial change just does not stand up. I am sure that if it is a rule of the House, I do not see why it should be overtaken by that statement.
Lord Elton: The noble Lord says that this is not a taxation Bill, and in so far as it merely addresses the status of Members of this House, he is clearly right. But when it affects the way in which a group of individuals is taxed differently from all other individuals, surely it becomes a hybrid Bill. I leave that question in the air because it will have to be answered before Report. The simpler question, in which the noble Lord invites those who are not expert to take part, is the effect of the amendments on domiciliation and the
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Lord Oakeshott of Seagrove Bay: That is a very fair point and I welcome the contribution of all these people, wherever they live. All I ask is that they contribute full British taxes at the same time.
Lord Desai: Does the noble Lord agree that this Bill is not about the taxation of people, but about whether they want to resign if they do not want to pay full taxation? It is not a taxation Bill, but a resignation Bill.
Viscount Astor: I am grateful to all noble Lords who have spoken to my rather modest amendment, and particularly to my noble friend Lord Selsdon, who gave us a tour de force on the issues raised which I am sure will be read by the international accountancy profession for years to come. He made some extremely important points.
The noble Lord, Lord Desai, rightly pointed out that the Liberal Party has not had any power to impose taxation for a long time and it is unlikely that it will. Of course it has the advantage that it is unlikely ever to be in Government in the future, so its Members are given an enormous freedom that the rest of us do not have. But the noble Lord made one point about domiciliation that concerned me, and that is where you are going to be buried. I think he said that when you are over 50, you must have a plot or a place to be buried. That suddenly reminded me that I am over 50 and I have absolutely no idea whether I have a plot or place to go to, and I suppose that I had better do something about it.
My noble friend Lord De Mauley put clearly the policy of the Conservative Party on this, which I agree with, and the noble Lord, Lord Hunt, put the Governments view, which was extremely helpful. The noble Lord raised one issue and I wonder whether he can expand on it. Are these issues being debated or discussed by the cross-party group? Not being a member of the group, I do not know what it is discussing, but it would be interesting to know whether these issues come under the remit of that group.
Lord Hunt of Kings Heath: It is tempting for me to go through the matters we are debating in the cross-party group, but I do not wish to anticipate the White Paper when it is published. I would have thought that this question would fall to be considered as part of a comprehensive programme of reform of your Lordships House.
If the Bill went through and became an Act, would it be legal under EU law? I do not know the answer to that question under the various human rights Acts that we have passed. My noble friend Lord Ferrers and I took the National Lottery Bill through this House and there was a great debate after it was passed about whether Ministers should buy a lottery ticket. It was decided that we should all buy a lottery ticket to encourage other people to buy them. If we won £10 we would keep it, and if we won the jackpot we were offered the opportunity to give the money to charity. I remember saying to the Permanent Secretary at the time that if I happened to win the jackpot I would have to consider my place in Her Majestys Government very carefully. That was the only assurance I could give. However, I wonder whether that would be enforceable under the various human rights laws if one moved abroad.
The noble Lord, Lord Oakeshott, gave a partial reply to my amendment which showed that there is a flaw in the Bill. He said quite clearly that he had no objection to any noble Lord who sat in this House living part of the time or some of the timewhatever the words werein, for example, France, and attending the House provided he paid full English tax. I agree with the noble Lord that that is a question of residency but not of domicile. If, for example, the noble Lord, Lord Oakeshott, moved and spent half the year in France, or whatever period it was, attended the House and still paid full English tax, he might also have acquired domicile status in France as well, which under this Bill that would mean that he would not be able to sit in the House because he might be domiciled in two places. That is a flaw in the Bill.
Lord Oakeshott of Seagrove Bay: The noble Viscount has still not quite grasped how the Bill works. It is not objectively whether you acquire domicile or residence in France; that does not matter. It is simply whether you are paying full British taxes on the basis that you are fully resident and domiciled in this country. It is not a test of fact; it is a basis of how you are actually charged. It is as simple as that.
Lord Selsdon: Perhaps I can remind the noble Lord that this is not true and that each country has a different requirement where after so many days you are deemed to be resident. But you cannot impose because if there is not a double taxation agreement, there can be double taxation. Perhaps the noble Lord could brush up on his residency and domicile facility. I will give him a paper on it.
Viscount Astor: The noble Lord, Lord Oakeshott, has contradicted something he said earlier. He is saying that you should pay full English taxand I do not disagree with thatbut the Bill refers to ordinarily resident and domiciled. He cannot have it both ways, which is what he is attempting to do. He is trying to produce some facts on which tax will be paidwhich is fair enoughbut in a way that does not quite work. I am afraid that that is the case and his arguments just do not hold water.
I would normally be tempted to ask the opinion of the House but I see that there is a mass of noble Lords on the Benches on my right and so, being the conciliatory person that I am, I shall read with great care what the noble Lord, Lord Oakeshott, said and I shall ask various experts on residency and domiciles to check that I am right. However, I know that he is not right. So, with those words of warning, I beg leave to withdraw the amendment.
(1A) Subsection (1) shall not apply to a Member of the House of Lords who is domiciled in the United Kingdom but is employed outside the United Kingdom by the Crown or by an international organisation of which the United Kingdom is a member.
The noble Lord said: I have tabled Amendment No. 3 at the suggestion of my noble friend Lord Oakeshott. Amendment No. 5 is purely consequential and I shall not speak to it further. During his opening speech at Second Reading my noble friend pointed out that there were some cases where Members of your Lordships House had been employed outside the United Kingdom as British or international public servants. He mentioned two specific cases. I have not asked their permission to give their names, but I doubt that they will object: one is my noble friend Lord Ashdown and the other is the noble Lord, Lord Robertson of Port Ellen, in his role as Secretary-General of NATO. I might add that I think the late Lord Cockfield had already become a Member of the House by the time he was appointed to be a Commissioner of the European Community, as it then was, in Brussels. No doubt there may be similar cases in future.
We therefore think it would be appropriate to exclude from the operation of the Bill Members of your Lordships House who are in the service of the Crownfor example, as diplomats or as members of the Armed Forcesalthough in fact people in those categories are mostly treated as residents anyway. We wish to extend that to employment with the international organisations of which the United Kingdom is a member. Those include, obviously, organisations such as the
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We see no justification for excluding people in this category and giving the exemption only to those in the service of the Crown, as is proposed by Amendment No. 4, which is also in this group. We believe the exemption should extend only to those who retain domicile in the United Kingdom. An existing domicile is retained unless an individual decides to live permanently in another jurisdiction; it cannot be changed merely by taking up residence there. An appointment to work for an international organisation in another country is entirely consistent with the retention of the United Kingdom domicile.
In our view, however, the exemption does not and should not apply to people who are employed outside the United Kingdom in the private sector or are employed by foreign Governments. I am not for a moment suggesting that there is anything improper about taking up employment abroad; of course not. But, increasingly, people are appointed to your Lordships House to do a job here. That appointment is for life, and I believe that it involves an implicit commitment by Members to make themselves available to participate in the work of your Lordships House so long as they are capable of doing so. If such Members choose to take residence abroad, we believe they should be prepared either to surrender their right to participate in the business of your Lordships House or, if they wish to retain the right so that they can return to active membership later, to continue to meet the tax liabilities that they would undergo if they were residents of the United Kingdom.
Depending on the terms of the double tax treaty with the county of actual residence and the tax law in that country, that might involve paying tax in both countries. There are ways of dealing with that to involve the exercise of double taxation. The simplest, perhaps, is one that is used in relation to countries with which we have no double tax agreement; that is, to allow the tax paid in the country of actual residence as a donation from income for the purposes of United Kingdom tax. That, though, is plainly a matter for a future Finance Bill and not appropriate for this Bill.
I have considered whether it would be possible to extend the exemption to people who are employed abroad by a charity. That looks attractive at first sightfor instance, one might think, Why should someone who is employed overseas by Oxfam not be exempted from this?but it would be difficult to monitor the rules if the exemption were extended that far, and it offers an opportunity for too many loopholes.
The exemption would not apply to Clause 1(6), which requires an appointee to your Lordships' House to be ordinarily resident and domiciled in the UK at the time of their appointment. If someone who would be suitable for appointment to your Lordships' House is employed for the time being outside the
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Amendment No. 3 would allow Members of your Lordships' House to take up posts of public service involving residence abroad without having either to pay double tax or to surrender permanently all rights to participate in the business of your Lordships' House. Restriction to employment by international organisations of which the United Kingdom is a member will prevent abuse and ensure that the service in question has links to the United Kingdom. The amendment is obviously not fundamental to the Bill, but it is useful. It should, and I hope will, be adopted without disagreement. I beg to move.
The noble Lord said: While the first part of the amendment proposed by the noble Lord, Lord Goodhart, is understandable, the second part will make the Bill very difficult to administer. I can understand that a Member of the House of Lords employed by the Crown should be excused from the provisions of the Bill. I am sure that it is right and proper that those working for their country should not inadvertently get caught up in this legislation. But does the noble Lord realise what a Member of this House,
Comprehensive lists of both the international organisations of which the UK is a member, and bilateral treaties under which the UK has obligations, are not centrally held, and to draw up such lists would incur disproportionate costs.[Official Report, Commons, 27/2/06; col. 304W.]
If a Member of this House is sufficiently adept to organise their tax affairs in such a way as to avoid UK taxation on some or all of their income, I cannot believe that that individual would not be able to find employment, however nominal it might be, within one of the innumerable international organisations of which the United Kingdom is a member. From a purely practical point of view, the proposed exemption by virtue of being a member of an international organisation as described in the Bill creates a very grey area.
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