Tax Harmonisation (Hansard, 12 February 1998)

§ 2. Mr. Waterson
What discussions he has had with his EU counterparts on tax harmonisation. [27202]

§ The Chief Secretary to the Treasury (Mr. Alistair Darling)
There have been preliminary discussions in ECOFIN about aspects of tax harmonisation. The Government's view is that direct taxation is primarily a matter for national Governments. Decisions on European 535 tax issues are subject to unanimity. The Government would not agree to measures unless they were in the United Kingdom's interests.

§ Mr. Waterson
Will the right hon. Gentleman confirm that one of the topics for discussion at those meetings is measures to combat tax avoidance? Will he also confirm that the Belgian tax authorities are participating in the discussions and that he has been drawing on the undoubted and unparalleled experience of the Paymaster General in those matters?

§ Mr. Darling
If the hon. Gentleman were genuinely interested in the subject matter, he would realise that the discussions were in respect of tax harmonisation measures that will benefit British businesses. That is a matter to which the Government attach great importance and which was neglected by the previous Government.

§ Mr. Frank Cook
In the course of the discussions, will my right hon. Friend discuss with his European counterparts who have an interest in the North sea oil and gas industries the seriousness of the higher operating costs, the diminishing capacity of the fields and the need for further investment, with a view to ensuring that the industry does not suffer any adverse effects of tax changes?

§ Mr. Darling
I am not sure whether the discussions to which I referred will have a direct bearing on the matters that my hon. Friend raises but, as he knows, the North sea oil industry is of immense importance to the United Kingdom, particularly the north-east of England and the north-east of Scotland. The ECOFIN discussions are geared primarily at establishing a code of conduct on business taxation so that Britain and British businesses are not exposed to unfair competition by action in other parts of Europe.

§ Mr. Trimble
Without arguing for uniform tax rates, will the Minister bear in mind the distorting effect of wide differences between tax rates on businesses and the economy? I am thinking in particular of the tremendous difference between corporation tax rates in the United Kingdom and the Republic of Ireland which puts various parts of the United Kingdom at a serious disadvantage in terms of attracting inward investment.

§ Mr. Darling
As the right hon. Gentleman knows, in the Budget and in the pre-Budget report, my right hon. Friend the Chancellor of the Exchequer announced a major reduction in corporation tax, which will be beneficial to the United Kingdom. That is an example of the fair competition that we want to enhance. The code of conduct is geared to stopping unfair competition, whereby member states may be tempted to shelter some niche market in an unfair way. However, I am sure that the right hon. Gentleman will agree that the measures announced by my right hon. Friend last year, which mean that we have one of the lowest corporation tax rates of any of our major competitors anywhere in the world, will be immensely beneficial to the United Kingdom, in respect of investment from here and inward investment.