European Union: Tax Harmonisation (Hansard, 2 December 1998)

§ Lord McIntosh of Haringey
My Lords, I congratulate the noble Lord on the timing of his Question. He will have been reminded by today's news that decisions in this area are subject to unanimity. As we have made clear, we will not agree to any action at the European level which would raise business costs and harm investment and jobs in Britain or Europe.

§ Lord Waddington
My Lords, while I thank the Minister for his reply, can he assist me on the following matter? Having spent the weekend asserting that tax harmonisation was not a serious issue but was a scare story created by the press, following yesterday's events are the Government now taking seriously the real threat to our national interest posed by the determination of France and Germany in particular to get rid of the principle of unanimity in tax matters and press ahead with tax harmonisation as part of their plan for a more economically integrated Europe? While the Chancellor of the Exchequer blusters about using the veto, is it not plain that by signing the document The New European Way drafted by his adviser Ed Balls a few weeks ago he committed himself to deeper European integration, including more tax harmonisation, and put the issue of tax harmonisation firmly on the agenda?

§ Lord McIntosh of Haringey
My Lords, I simply do not accept the noble Lord's premise; nor do other noble Lords, judging by the reaction of the House. We have made it clear that tax proposals require unanimity. A change to that means a change in the treaty, which in turn requires unanimity, and that simply will not happen.

§ Lord Barnett
My Lords, does my noble friend find it as sad as I do that a serious and important topic such as this should be treated in this way? Does he accept that there is a great danger of using the veto for everything and throwing out the baby with the bath water? Does he also agree that currently the Germans are seeking to deal with what they describe as tax evasion—we call it tax avoidance, which is legal—and stop the use of the Channel Islands, for example, to 488 establish trusteeships to save huge amounts of tax? Would we not support that? Perhaps even the noble Lord, Lord Waddington, would agree with that.

§ Lord McIntosh of Haringey
My Lords, I am not quite as good as my noble friend at righteous indignation. I agree that there are elements of European Commission proposals that may be helpful to this country and we will support those. If there is a proposal to reduce or eliminate harmful tax competition that is for the benefit of this country as well as others we shall support it. But the personal views of the German Finance Minister, which is what all this row is about, do not amount to European Commission proposals. They do not even amount to something that we have to veto, although we would do so if we had to.

§ Lord Taverne
My Lords, does the noble Lord accept that there is general agreement in this House that, for example, proposals on a universal withholding tax without exemptions are to be resisted? But will the Government continue to judge the matter on a case-by-case basis? Does the noble Lord agree that not only are there cases of tax harmonisation that may be beneficial to this country, but also other examples in the field of excise duties? In particular, does the Minister agree that there may be great advantage in the harmonisation of tax provisions to enable the promotion of pan-European pensions that will become increasingly important for a large number of people whose employment takes them to different countries within Europe?

§ Lord McIntosh of Haringey
My Lords, I agree with the noble Lord, Lord Taverne, that a withholding tax is not the Government's preferred solution to the problem that it is meant to address. We much prefer the exchange of information, as we have made very clear. I have also made clear that there are occasions when common action between member states is to the benefit of this country. We shall take advantage of that when appropriate.

§ Lord Lawson of Blaby
My Lords, while I welcome the assurance that the Minister has given the House that there is no way in which the Government will agree to any change in the unanimity rule governing fiscal decisions, is he aware that this is not a purely economic issue? Does he agree that not only would this be economically very damaging to this country but that, politically and historically, on many occasions the debate between the parties in this country has been about whether levels of public expenditure and taxation should be higher or lower and to remove that from this country would be a total denial of our democratic rights?

§ Lord McIntosh of Haringey
My Lords, I am grateful to the noble Lord, Lord Lawson, for his reaction to what I, the Chancellor of the Exchequer and the Chief Secretary have said. An important reason why we are opposed to tax harmonisation is that it is bad for business and bad for competitiveness in the economy. However, I recognise the point that the noble Lord makes.

§ Lord Shore of Stepney
My Lords, we are not dealing with an off-the-cuff remark by a German Finance Minister, as my noble friend suggested. Is he aware that the joint declaration signed by the German and French Governments and their Finance Ministers at Potsdam yesterday pledges both countries to the progressive and rapid harmonisation of taxation in the European Union? The matter has to be taken very seriously indeed. While we welcome the Minister's assurance that we shall exercise our veto to prevent these matters applying to us, what has my noble friend to say about the possibility under the enhanced co-operation procedures of the Amsterdam Treaty of the other European countries coming together to agree on tax harmonisation and then making that a condition of Britain's further move to entry into the single currency—if we were so foolish as to adopt that course?

§ Lord McIntosh of Haringey
My Lords, I do not know how I can make the Government's position clearer than I have. It is not just Britain which is opposed to tax harmonisation. A number of other European countries have expressed the same view. Some are going into the single currency on 1st January. After all, the United States, with 300 million people and 50 member states, has a high degree of federalism and no tax harmonisation.

§ Lord Peyton of Yeovil
My Lords, while we understand and appreciate the assurance given by the Minister, will the noble Lord accept that circumstances can change, and that the gathering strength of the Franco-German axis, changed as it has been by Mr. Lafontaine's arrival in high office in Germany, may well mean that the Government's position may not remain as strong as they now believe it is.

§ Lord McIntosh of Haringey
My Lords, I do not think that the noble Lord should get too excited. The Government's position is absolutely clear and unequivocal.