HL Deb 16 July 1999 vol 604 cc641-4

11.55 a.m.

Lord Carter rose to move, That the draft order laid before the House on 1st July be approved [24th Report from the Joint Committee].

The noble Lord said: My Lords, in moving this order, for the convenience of the House, I shall speak briefly also to the related INTELSAT (Immunities and Privileges) (Amendment) Order 1999.

The miscellaneous provisions order provides for refunds of insurance premium tax (IPT) and air and passenger duty (APD) to 26 international organisations listed in the schedule to the order. The insurance and premium tax and the air and passenger duty were both introduced in 1994. The proposed refunds are to meet our present international obligations. Established international practice is that one state should not tax other states through the intermediary of an international organisation, and that the host state should not derive undue fiscal advantage from the presence on its soil of an international organisation. Insurance premium taxes are levied on a building's household contents and on vehicle insurance policies. I am sure that your Lordships will know that life policies, pensions and permanent health insurance are among the types that are exempt. The order also includes some minor amendments to some of the 26 orders, updating names of organisations and the titles of some high officers.

The second order, INTELSAT (Immunities and Privileges) (Amendment) Order 1999, in addition to providing for refunds of insurance premium tax and the air passenger duty, provides for relief from non-domestic rates and exemption from the UK social security provisions for members of staff participating in INTELSAT'S social security scheme. The draft orders confer only the privileges and immunities which the Government are internationally obliged to confer. I beg to move.

Moved, That the draft order laid before the House on 1st July be approved [24th Report from the Joint Committee].—(Lord Carter.)

Lord Bruce of Donington

My Lords, I have one question to ask my noble friend in connection with the International Organisations (Immunities and Privileges) Miscellaneous Provisions Order 1999. Around 20 organisations appear to be affected. What is the net cost ultimately to the Exchequer as a result of those changes? It may well be that they balance out, in which case I shall be reassured that there is no charge to public funds. If, on the other hand, there is an extra cost involved, I should be glad to have my noble friend's view as to what money will be ultimately borne, either now or later, by the British taxpayer.

Lord Avebury

My Lords, the question raised by the noble Lord is a legitimate one. It prompts me to ask whether the list of organisations specified in the schedule to the miscellaneous provisions order is complete, or are there other organisations which have already gained the exemptions from the particular taxes set out in the schedule? Quite apart from the amending orders which must be made to comply with our obligations, as the Minister has explained, to exempt all the international organisations from taxes and customs duties, it would be useful to have an annual report listing all the organisations specified under the 1968 Act which gives details of the amounts of revenue forfeited by the tax concessions. The 1968 Act gives unlimited power to specify these organisations. As has already been explained, we have to extend the exemptions to every one of them, so that the loss of revenue could be progressive and increasing.

The order shortly to be debated, the International Copper Study Group (Legal Capacities) Order 1999, seems to extend the list even further. However, I note that that order does not confer exemptions or privileges on that group, but only specifies it as a body corporate within the meaning of the 1968 Act. It might have been useful if the Minister had explained the difference between the International Copper Study Group and all the other organisations mentioned in the schedule to the miscellaneous provisions legislation, some of which appear to be very similar, being study groups themselves, such as the one on rubber. Why is the copper organisation being dealt with differently from the rubber organisation?

There is one other minor point. Why was it necessary to make a separate order in respect of INTELSAT instead of including it in the provisions in the schedule to the miscellaneous provisions legislation? Although it deals with rates as well as airport taxes, there surely could have been some minor change in the wording in the miscellaneous provisions legislation to enable all of the organisations to be dealt with in a single order.

Lord Brabazon of Tara

My Lords, I am afraid that we cannot give the same welcome to these orders as we gave to the earlier orders today. If the general public were aware of the orders, they would rightly be resentful of the fact that a lot of faceless bureaucrats from 26 organisations of which they had never heard would not have to pay air passenger duty. Of course, no tax is popular, but air passenger duty is particularly unpopular because it is a flat rate tax: £20 on intercontinental and non-European Union flights, regardless of whether it is a £49 easyJet flight to Zurich or a Concorde flight to New York.

I do not criticise air passenger duty as it was, of course, the previous government who introduced it, but I wonder how many people based in this country will claim the exemption, and how much money we are talking about. I understood the Minister to say that we would pay back these organisations the sums that they had paid since 1994. That may be quite a lot of money. Presumably there is also an ongoing commitment.

I also hope that these people will have to pay their air passenger duty when they buy their tickets and then reclaim the money afterwards. I presume that someone in the Foreign Office will check the claims thoroughly to ensure that they relate only to official business and not to their personal travel arrangements. There is a danger that the scheme could be abused in that way. The same applies to the insurance premium tax. As the noble Lord, Lord Bruce of Donington, asked, how much will all this cost? How many people are involved, working in this country for these organisations? If it were not for the fact that we have an international obligation to do this, I would very much prefer not to.

Lord Redesdale

My Lords, we welcome these orders in so far as they represent an international obligation which we can hardly avoid. However, I wonder whether the immunities and privileges granted under these orders are being kept to the minimum within our international obligations. I also wonder whether they will be fully reciprocated by other states, where appropriate.

It may be outside the remit of these orders, but does the Minister agree that the levels of taxation paid by international civil servants should be not lower than the local levels being set? I am also tempted to raise the thorny issue of parking, but as it is not contained within these orders, I feel obliged not to.

Lord Carter

My Lords, perhaps; the number of questions asked is what happens when one agrees to move an order that is apparently simple and technical. There have been many questions, but I shall deal first with that asked about the total amounts involved by my noble friend Lord Bruce of Donington. We estimate £700,000 in the financial year 1999 to 2000 to meet claims for this and past years, and thereafter the estimate is an annual sum of £260,000.

The noble Lord, Lord Brabazon of Tara, asked about the claims. They are submitted and have to be repaid. The provisions apply not to the personal travel arrangements of staff but only to official duties.

The noble Lord, Lord Avebury, asked why there was a separate draft order for INTELSAT. The INTELSAT order, in addition to providing for refunds of IPT and APD, provides for relief from non-domestic rates and for members of staff participating in INTELSAT'S social security scheme exemption from the United Kingdom's social security provisions. It was felt that a second order was appropriate as the exchange of notes with INTELSAT went beyond simply providing refunds of IPT and APD, as in the first two orders.

The noble Lord, Lord Avebury, also asked about the number of organisations involved. Headquarters agreements of some international organisations already cover exemption from IPT and APD. Seventeen exchanges of notes were necessary to provide a refund of taxes to those organisations which were not entitled to them under the wording of their existing agreements. It is proposed that the relief will apply to 43 international organisations, although only 26 are specified in this order. The legal complexities are being addressed, and amendments to headquarters agreements and legislation as necessary will follow in due course for the other organisations.

Lord Avebury

My Lords, does that mean that the £700,000 will have to be increased to cover the difference between the 26 organisations mentioned in the schedule to this order, and the total number of 43?

Lord Carter

My Lords, one has to be frank in these matters, and I do not know the answer to that, but I see that there is a note on its way. The answer appears to be that the sum covers all 43 organisations. The noble Lord, Lord Brabazon of Tara, appeared hostile to these orders, and I shall enjoy reading this part of my brief.

Ministers in the previous government approved the protocol department's recommendation in December 1996 that we should refund IPT and APD to all international organisations of which the: United Kingdom is a member and which have headquarters or offices in the United Kingdom and to those others, although not based here, to which we are legally obliged to give relief from such taxes and duties. According to our international obligations, we are continuing a policy approved by the previous government.

In response to the noble Lord, Lord Avebury, I should add that the International Copper Study Group is not based in the United Kingdom. The only obligation on the United Kingdom under the terms of reference of the organisation is to confer the legal capacity, and to compile a list of all refunds would be a complex and lengthy task. However, I shall write to him on that point.

The noble Lord, Lord Redesdale, was kind enough to tell me that he would ask me whether the tax benefits are reciprocal. International organisations do not function on the basis of the principle of reciprocity. It is established international practice that one state should not derive undue fiscal benefit from the funds subscribed to an international organisation by its members or other states as a result of the presence on its soil of the organisation. Thus international organisations that are based in other states also benefit from refunds on taxes and duties of this nature.

I was also asked about the tax rates paid by international civil servants. None of these orders provides for exemption from income tax for staff of international organisations. The orders which the International Organisations (Immunities and Privileges) Miscellaneous Provisions Order amend mostly provide for exemption from income tax for staff who are participating in the internal tax system for the benefit of the organisation concerned. This is in accordance with established international practice, and of course it benefits all the members of the organisation by resulting in lower financial contributions.

I think I have answered all the questions that I was asked. If I have not, I shall write to noble Lords concerned. I am extremely grateful for the interest that has been taken.

On Question, Motion agreed to.