HL Deb 28 October 1998 vol 593 cc1912-3

3 p.m.

Lord Newby asked Her Majesty's Government:

What estimates they have made of the effects on corporate tax receipts of the growth of trading on the Internet.

Lord McIntosh of Haringey

My Lords, the Government are examining the effect of the growth of trading on the Internet on corporate and other tax receipts in close consultation with other governments and with the business community. The Organisation for Economic Co-operation and Development is the key forum in which discussions are taking place and the Government are taking a lead role.

Lord Newby

My Lords, I thank the Minister for that reply and stress his point that the Government should take a leading role in this. In negotiations through the OECD, will as much priority be placed on ensuring that tax is not avoided as ensuring that we do not find ourselves with double taxation, as has been the case up to now?

Lord McIntosh of Haringey

My Lords, one of the principles which came out of the Ottawa Conference earlier this month on OECD was that we should be seeking both to avoid double taxation and to achieve neutrality of taxation. That does not mean that there would need to be any new taxes and there would be no need to have the flat rate "bit tax" which some people have suggested.

Lord Peston

My Lords, can my noble friend clarify this intriguing Question a bit further? The noble Lord, Lord Newby, used the word "avoided". Is tax avoidance or tax evasion the issue here? As I understand it—much as one may think it deplorable—tax avoidance is perfectly legal and therefore it is peculiar that one would single out the Internet as one specific area in which to try to stop tax avoidance. Alternatively, do the Government suspect that trading via the Internet will lead to the total concealment of income so that there will be actual tax evasion?

Lord McIntosh of Haringey

My Lords, we are involved both with tax evasion and tax avoidance. We would be involved with tax evasion if there were to be any significant possibility of those trading on the Internet avoiding identifying themselves, either the customer or the supplier. Part of the international negotiation is to that effect. We are involved with tax avoidance if it is possible for anybody legally to slip through the net. That is why the co-operation of the major trading companies within OECD is so important.

Lord Avebury

My Lords, if somebody in the United Kingdom buys a piece of software by downloading it from a site in the United States, is that transaction subject to VAT? If so, has any money ever been collected for transactions of that nature?

Lord McIntosh of Haringey

My Lords, no. The location of the tax obligation is at the point of supply. The supplier in the United States would be eligible for such sales taxes as are applied in the state or city concerned.