APPOINTMENT OF TAX REPRESENTATIVES (Hansard, 23 April 2001)

§ Mr. Letwin
I should like to begin by asking the Financial Secretary to confirm that clause 33 replicates the standard VAT provisions. I wonder whether he can give us an idea of how far the clause will apply. That is relevant in the context of the debate that we shall have on the serious matter of job exports. So far as the Government are aware, what is the structure of the industry's non-resident holdings? Are there significant non-resident holding companies with significant subsidiaries that operate or—to revert to our earlier discussion—could appear to the commissioners to be intended to operate in a taxable domain in respect of the aggregates levy?
Has the Financial Secretary discussed the European Union aspects of the clause in relation to any such non-resident holding companies and their subsidiaries? Has he received legal advice on that? Is he aware of the legal challenges to the proposal and its effects currently being contemplated and mounted by various people in the domestic industry under EU law? What advice has he had about that? It would be helpful to understand those points, which relate to clause 33, although their importance will become evident when we debate clause 48—the substantive debate that we need to have in the time remaining this evening.

§ Mr. Timms
Clauses 33 and 34 are technical provisions, the purpose of which, in common with the other indirect taxes, is to provide special treatment for non-resident companies to protect the Inland Revenue. The great bulk of the provisions is based on those for the landfill tax, much of which was, in turn, drawn from the arrangements for VAT, as the hon. Gentleman suggests. However, the provisions are not intended to address non-resident holding companies; they are essentially intended to deal with importers who do not have a permanent base in the United Kingdom. Air passenger duty is an example of the need for such provisions.
I do not have the information that the hon. Gentleman requests, and I have received no representations about a legal challenge. Of course, EU state aid arrangements will need to be discussed, and those discussions will take place in the usual way.

§ Mr. Letwin
I am grateful to the Financial Secretary for that response. I am sorry, but I seem to have misunderstood the point that he made about the purpose of the clause. Is he saying that the purpose is to catch the importer who could otherwise avoid the import form of the levy?

§ Mr. Timms
indicated assent.

§ Mr. Letwin
That clarification is very helpful. In that case, I shall ask a question different from the one I misguidedly asked in the first place. How will non-resident holding companies with substantial subsidiaries in this country be affected? Will the domestic subsidiary simply be treated as an ordinary domestic company for the purposes of the tax?

§ Mr. Timms
indicated assent.

§ Mr. Letwin
I am grateful for that clarification. In that case, I have a further hypothetical question, because I do 103 not imagine that there will be many imports of pure gravel. However, when an import qualifies for the levy because it appears in the taxable form of gravel and not as prefabricated concrete, I understand that it will be subject to the levy exactly as if it had been moved from a UK quarry. Under the terms of clause 19, it will be treated as if it had been commercially exploited. If that is the case, presumably there is a clear argument for parity of treatment between the domestic and the imported product.
I take it that no state aid issue will result from such parity, but does it not follow that an odd and negative state aid issue will arise in relation to an import that escapes the levy because it has been cloaked in the form of prefabricated concrete? If the same object is produced by a domestic subsidiary of a non-resident holding company, it would be subject to the levy because it is produced domestically. Has the Financial Secretary received any advice on that matter?

§ Mr. Timms
I have been involved in several discussions with Brussels about state aid matters, and I do not envisage any concerns being raised about the point to which the hon. Gentleman has drawn attention.