§ 8. Mr. Tim Loughton (East Worthing and Shoreham)If he will make a statement on the harmful tax measures referred by the UK Government to the code of conduct working group on harmful tax competition. [66521]
§ The Paymaster General (Dawn Primarolo)As I said in my answer of 17 December 1998 to the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb), the measures from the UK are international headquarters companies, special tax measures for the film industry, enterprise zones, 100 per cent. first-year capital allowances for small and medium enterprises in Northern Ireland, and roll-over relief for balancing charges arising on the disposal of shipping.
That does not imply that the measures are actually harmful under the code. Discussions on these and other measures are proceeding. International holding companies are due to be abolished this April, following decisions made earlier by the Government. The Government are confident that the other four measures are not actually harmful within the meaning of the code, and are robustly making the case.
§ Mr. LoughtonCan the hon. Lady tell us the details contained in the measures on her list with regard to the British shipping industry, British enterprise zones and the British film industry? When will she publish in full the details of the measures on the list? Will she give the House a guarantee that before she signs away any of the House's competence on tax matters to be decided here behind closed doors, she will have the courtesy first to debate those measures with hon. Members?
§ Dawn PrimaroloThe measures have already been published in a written answer on 17 December 1998, and I have repeated verbally today the measures listed in the UK's name. With regard to my right to sign away anything on behalf of the Government, I do not have such a right. I am subject to scrutiny in these matters, and I am sure that the House will ensure that that takes place.
§ Mr. Jim Cousins (Newcastle upon Tyne, Central)May I urge my hon. Friend to tackle tax competition where it is harmful to British interests? I draw to her attention the corporation tax regime in the Republic of Ireland, which offers a selective tax concession on new company profits where there is new inward investment. That is harmful tax competition which damages inward investment opportunities in the north-east of England and, I might add, in the north-east of Ireland.
§ Dawn PrimaroloGeneral rates of corporation tax are not included in the scope of the code. I can tell my hon. Friend that the code of conduct working group is looking at measures and their impact, and at whether they encourage artificially the location of investment, distorting the allocation of real investment. That deals with my hon. Friend's point. It is not only the European 470 Union that is examining these issues—the Organisation for Economic Co-operation and Development and the G7 are doing so too.
§ Sir Michael Spicer (West Worcestershire)In that context, may we have an absolute assurance that the Government will veto all attempts to harmonise direct or indirect taxation?
§ Dawn PrimaroloWe will always protect the British national interest. We have repeatedly made that clear in the House.
§ Mr. Geraint Davies (Croydon, Central)Does my hon. Friend agree that competition on corporation tax between nation states in euroland is a good thing, as it brings about a more competitive average rate in Europe to attract inward investment? Will she fight to ensure that competition on corporation tax in Europe continues?
§ Dawn PrimaroloThe simple answer is yes. The priorities for the European Union must be employment and competitive markets. That is what we should be taking forward.
§ Mr. David Heathcoat-Amory (Wells)Does the Minister accept that the entire exercise is extremely dangerous? Unfair tax competition is simply another term for low taxes enjoyed by this country, which give us an advantage in the European and global market. Some of the measures to which the hon. Lady referred were passed in the Government's first Finance Bill, yet their measures are already under scrutiny in the secret group that she chairs. That shows that what the Government do in one Finance Bill they have to unravel in another. Will she ensure that she keeps the House fully informed about the measures, and will she announce today that she will adopt a policy of vetoing wherever possible any undermining of our tax advantage, which was built up over many years by this Government—by this party?
§ Dawn PrimaroloThat was nearly a compliment for the Government, and congratulation on our economic strategy.
I say to the right hon. Gentleman again that general rates of corporation tax are not included in considerations within that particular group. I also remind him that the previous Government signed a resolution at the ECOFIN Council of November 1992, when they said that
consideration is urgently needed of possible remedies tothe problems of unfair tax competition. That is precisely what is happening, and the right hon. Gentleman should not look for conspiracies everywhere, although I understand that there are a few going on in his party at the moment.