HL Deb 23 May 2000 vol 613 cc636-8

3.3 p.m.

Lord Northbrook

asked Her Majesty's Government:

What representations they have received concerning the Budget proposals for changes to the taxation of "mixer companies".

Lord McIntosh of Haringey

My Lords, the Government have received representations about the likely impact of the proposed changes and held a number of meetings with companies, tax advisers and representative bodies such as the Confederation of British Industry.

Lord Northbrook

My Lords, I thank the Minister for his reply. Can he explain, and justify, why the Treasury's estimate of the additional cost to companies of this measure is so different from that of the companies themselves and their advisers?

Lord McIntosh of Haringey

My Lords, I believe that the boot is on the other foot. The estimate of the Treasury, which is well documented and explicit, is based on a re-analysis of real claims and the Red Book. By contrast, the claims made apparently on behalf of those in industry who say that they will be affected vary enormously. PricewaterhouseCoopers said initially that it had a single client who would lose £1 billion. It then said that it had 24 clients who would in total lose £1.9 billion. The CBI did a survey and came up with the figure of £740 million. The Treasury estimate has remained constant at between £150 and £175 million. Unless those who seek to attack the Treasury get their act together I do not believe that we should take them too seriously.

Lord Jenkin of Roding

My Lords, can the Minister say why the Government rejected the initial sensible proposal of the Inland Revenue to the effect that pooling—sometimes referred to as onshore pooling—should continue to be allowed so that companies can get the benefit of double tax relief? They do not need to go the whole way and abolish pooling altogether.

Lord McIntosh of Haringey

My Lords, I shall certainly not open up any claimed disagreement between the Government and the Inland Revenue. The Inland Revenue is part of government. These proposals have been in the public domain for about a year. The first discussion paper appeared 12 months ago. It is astonishing that those who object to this very modest removal of subsidy from the United Kingdom to high level tax regimes and the restoration of a level playing field cannot get their act together and decide on what basis they oppose the Government's proposals.

Lord Clark of Kempston

My Lords, does the Minister agree that if this proposal is implemented it will be another tax by stealth, proving that the statement by the Chancellor of the Exchequer that during his stewardship taxation has not increased is false?

Lord McIntosh of Haringey

My Lords, I could not disagree more with the noble Lord. This must be looked at in the light of all corporate tax changes. Among the major industrialised countries we have the lowest rate of corporation tax, and we have abolished advance corporation tax and stamp duty on intellectual property. We have provided tax relief for the purchase of goodwill and also abolished withholding tax on international bonds. In those circumstances, nothing that the noble Lord says about corporate taxation can be dignified by the term "stealth taxes".

Lord Hughes of Woodside

My Lords, does my noble friend agree that if this matter has been under discussion for over 12 months it cannot be a stealth tax?

Lord McIntosh of Haringey

My Lords, my noble friend has a very good point.

Lord Newby

My Lords, can the Minister confirm that the Treasury has not finally closed the door to discussions on this matter and there is still scope for a compromise whereby additional tax may be raised but without hitting companies to the extent now claimed?

Lord McIntosh of Haringey

My Lords, the Treasury has never had a closed mind to these matters; otherwise, we would not have announced at the beginning of this month a deferral of nine months in the implementation of this long overdue measure. That shows that we listen to representations. As to whether we shall listen to representations of the kind made by the noble Lord, that is another matter.