DOUBLE TAXATION RELIEF (Hansard, 26 February 1970)

§ The Financial Secretary to the Treasury (Mr. Dick Taverne)
I beg to move, That the Transitional Relief for Interest and Royalties paid to Non-Residents (Extension of Period) Order 1970, a draft for which was laid before this House on 9th February, be approved.

§ Mr. Speaker
May I suggest that, unless there is objection, we take the next Order at the same time? It is: That the Non-Residents' Transitional Relief from Income Tax on Dividends (Extension of Period) Order 1970, a draft of which was laid before this House on 9th February, be approved.

§ Mr. Taverne
These two Orders extend for one further year certain transitional double taxation arrangements which arise from the 1965 tax changes. I think the House is aware of the nature of the transitional Orders. It is to some extent unfortunate that they have to be renewed again, but considerable progress has been made in the further agreements, which are somewhat complex to negotiate, and I think it is of advantage that these Orders should temporarily be continued. If there are particular points the hon. Member for St. Ives (Mr. Nott) wishes to raise, I shall be glad to answer them.

§ Mr. John Nott (St. Ives)
I think it is distressing, although perhaps inevitable, that we have these two Orders before the House tonight. This is the fifth year in which the transitional provisions are to apply. While we appreciate that the negotiation of double taxation agreements can be a very technical and long drawn out affair, it is nevertheless unfortunate that the process of renegotiation is taking such an extended period of time. While it takes two to make a bargain, it seems to be taking an unconscionable time to arrive at the agreements which still need to be completed following upon the 1965 tax changes.
Will the Financial Secretary tell the House where we stand now? It is perhaps slightly easier for my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin) to follow the score as the nights go by. It looks a little as if the hon. and learned Gentleman and some of his colleagues could be despatched into electoral oblivion before 1527 the double taxation changes necessitated by the 1966 Act are finally settled.
Last year, in response to a request from my hon. Friend, the then Financial Secretary told the House that under Section 31 of the 1966 Finance Act, following the agreement at official level with Austria, Finland and Germany, only the Faroe Islands, Pakistan and South-West Africa were still under consideration. What is the position today? Have we now completed agreements in regard to the Faroe Islands, Pakistan and South-West Africa? Could the Financial Secretary tell the House the answer.
In regard to Section 32 I understand that we started with some 88 overseas territories to discuss. By this time last year there were still 43 to negotiate. Could we be told how much further forward we have moved in the intervening period? Although I can understand the problems of settling all these agreements, it seems strange that the momentum, which one might expect to be slow in the initial years, should not now be much faster. Certainly from mid-1965 to the end of 1968 a pattern should have been developing but after five years we must surely be nearing the conclusion of this admittedly complicated and extended task. If he can give us the up-to-date position we can leave the matter there, but we would not want to do so without expressing our dissatisfaction at the speed with which the Government seem to be progressing.

§ Mr. Taverne
With the leave of the House, I should like to answer the points made by the hon. Member for St. Ives (Mr. Nott).
In regard to Section 31 good progress has been made in renegotiating new agree- 1528 ments. We have not completed all the agreements to which the hon. Member referred at this time last year. We have now agreements or protocols in force with seven countries. Two more have been approved but are not yet in force. Two more are cases in which agreement has been reached at official level. This includes the Faroes and also Germany. Only Pakistan and South-West Africa are now left.
In regard to Section 32, there are 40 cases in which renegotiation has not yet resulted in the signing of a revised agreement. However, in five of those cases agreement has been reached at official level and nearly all the remaining 35 countries are smaller Commonwealth countries. In these cases our existing agreements generally contain no interest provision so that in those cases Section 32 applies only to royalties paid by close companies. Normally there will be comparatively few cases in which royalties are payable by close companies to residents in, say, the Virgin Islands, with 8,000 inhabitants, and similar small Commonwealth territories. Therefore, although there are 40 cases in which agreements have not yet been signed, in practical terms the significance is not very great.