HC Deb 15 January 1998 vol 304 cc470-1
3. Mr. Letwin

What discussions he has had with his EU counterparts on tax avoidance issues. [21053]

Mr. Gordon Brown

On 1 December 1997 the ECOFIN group of Finance Ministers agreed a code of conduct on business taxation. The code of conduct is aimed at eliminating special business tax regime loopholes, and we are working closely with our European partners and have persuaded the Commission to adopt a more rigorous and thorough application of the state aid rules in this area. In relation to multinational companies, we will keep our European partners, the G7 and the Organisation for Economic Co-operation and Development in touch with our discussion on how we modernise the tax rules on transfer pricing for multinationals and the existence of controlled foreign companies. We are publishing our proposals in these areas.

Mr. Letwin

I thank the Chancellor for that illuminating reply. In the light of the helpful comments that the Financial Secretary to the Treasury made to European Standing Committee B, when she told us that Countries engage in unfair competition when they adopt zero or near-zero tax rates for special niche areas"—[Official Report, European Standing Committee B, 26 November 1997; c. 2.], would the Chancellor class the Paymaster General as a special niche area?

Mr. Brown

Again, it is a measure of the modern Conservative party that Conservative Members cannot now even address the issues of Europe and taxation without reducing them to trivia.

We made an important breakthrough in December in dealing with harmful tax competition. We persuaded other countries, which had been reluctant to support those measures, to support them. We are tackling the problem of multinationals and transfer pricing in a way that the previous Government never did. I should have thought that the hon. Gentleman would welcome the measures that we are taking in all those areas.

Mr. Gapes

Does my right hon. Friend agree that the Government's measures are tough and are in the country's interests, and that it is a bit rich for Conservative Members to come out with all that criticism now, when they did nothing about the situation for 18 years?

Mr. Brown

Yes. We took measures in the first Budget to close a number of tax loopholes. We have done what the previous Government failed to do, and by doing so have raised more than £1.5 billion for the Treasury. Conservative Members who raise questions about these matters now seem to support taking action in areas where, when they were in government, they took no significant action for 18 years.

Mr. Wilkinson

Can the Chancellor give the House an assurance, following his meetings at ECOFIN and with his counterparts in other forums, that the European Union will not require the United Kingdom to extend the scope of value added tax, and that he will effectively prevent any such extension?

Mr. Brown

We have made it absolutely clear that these are matters for vetoes and for the House.

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