Tax Harmonisation (Hansard, 20 November 2002)

§ Baroness Wilcox
asked Her Majesty's Government:
Whether they would support a move towards tax harmonisation within the European Union.

§ Lord. McIntosh of Haringey
My Lords, the Government's view is that fair tax competition is the way forward for Europe, not proposals for tax harmonisation. The Government will not support any action at European level that would threaten jobs and investment or damage the competitive position of British business.

§ Baroness Wilcox
My Lords, I thank the Minister for that Answer, but I am not sure that I understand. Does he expect tax harmonisation to appear in the draft constitution being drawn up by the Convention on the Future of Europe?

§ Lord McIntosh of Haringey
My Lords, there are two answers to that. First, I understand that the work on the draft constitution has got only so far as the preparation of reports by working groups. Nothing conclusive has come out of that. The next stage would have to be that they would have to be accepted by the constitutional convention. Of course, if any change were proposed which would involve a change in the treaty—and this certainly would—we could and we would veto it.

§ Lord Tomlinson
My Lords, is my noble friend aware that as a representative of your Lordships' House on the Convention on the Future of Europe, I remain constantly resolute concerning financial no-go areas such as tax harmonisation, as well as pursuing a more positive agenda to secure budget discipline and to maintain the United Kingdom rebate, as well as ensuring that the revenue side of a European budget is the responsibility of the Council of Ministers and the member states?

§ Lord McIntosh of Haringey
My Lords, I am encouraged to know that my noble friend is on message. Certainly, I know from his own conviction and experience that he agrees with us that there is scope for targeted changes in taxation to avoid unfair tax competition. However, that is different from tax 373 harmonisation in the sense that I believe the noble Baroness, Lady Wilcox, meant. We are against it and we will not allow it.

§ Lord Taverne
My Lords, I support the Minister. Is there not something inconsistent in opposing all forms of tax harmonisation? It has been generally agreed that certain forms of government subsidies to industry are anti-competitive and undesirable. The same effect can be obtained by special tax incentives which can be equally uncompetitive. Is it not therefore desirable that while in general retaining unanimity about tax changes certain forms of harmful tax competition should be eliminated?

§ Lord McIntosh of Haringey
My Lords, I think that is what I just said—and not just because I said it. It is true. That is why, if we take the example of business taxation, ECOFIN has, over a number of years now, been pursuing targeted measures of the kind that I referred to, which would be helpful to business, which would avoid unfair tax competition, but would not involve compulsory harmonisation. The noble Lord, Lord Taverne, is entirely right.

§ Lord Barnett
My Lords, I am not sure whether I am on or off message. I listened carefully to my noble friend's Answer. Would the Minister accept that, while taking the point he made, some tax harmonisation could be a positive benefit to the UK? Therefore, can I take it that he and the Treasury are not ruling out necessarily all forms of tax harmonisation?

§ Lord McIntosh of Haringey
My Lords, I am in danger of repeating myself. I thought that the noble Lord, Lord Taverne, had asked me that question and that I had answered it as well as volunteering the information. Yes of course there are some forms of unfair tax competition which are undesirable from a national point of view and from the point of view of business. If we can reach agreement on eliminating those forms of unfair tax competition and producing the fair tax competition to which I referred in my Answer to the noble Baroness, Lady Wilcox, it is to the advantage of all of us.

§ Lord Pearson of Rannoch
My Lords, are the Government not aware that it really will not matter whether they support any form of tax harmonisation if the Commission brings it forward as a single-market measure? If that happens, if we are outvoted and if the Luxembourg Court supports the Commission's use of the treaties, as it surely will, that will be that: we will be stuck with tax harmonisation of whatever form, whether we like it or not. Is not that what the treaties say?

§ Lord McIntosh of Haringey
My Lords, no, the noble Lord, Lord Pearson, is almost entirely wrong. No, on reflection I think that he is entirely wrong. Article 93, which is concerned with the harmonisation of indirect taxes for the purpose of the internal market, 374 to which the noble Lord is referring, can be implemented only by unanimity among member states.
Article 94, formally Article 100, which is concerned with direct taxation, provides only residual single-market powers; far fewer than Article 93. However, it too is constrained by the fact that it can he implemented only by unanimity.

§ Lord Mackie of Benshie
My Lords, can the Minister tell the House where Britain stands in the rate of taxation? Do we pay more than other people?

§ Lord McIntosh of Haringey
My Lords, of the 15 member states in what the Opposition call the "tax burden" but which I prefer more accurately to call the "percentage of taxes and social security contributions as a percentage of gross domestic product"—and I assume that that is the definition to which the noble Lord, Lord Mackie, refers—we are 11th.

§ Lord Saatchi
My Lords, I hope that no one in Brussels is a reader of Hansard of your Lordships' House because the answer that the Minister gave to my noble friend Lady Wilcox could result in our expulsion from the EU. Is he aware that the president of the Convention on the Future of Europe, not a working group, says that he identifies a clear consensus in the convention for the scrapping of national vetoes on tax and has issued this specific threat to countries such as ours which reject tax harmonisation: We should say", that is, to countries such as ours, … you can no longer be in this political system. That will be the consequence of refusal"?

§ Lord McIntosh of Haringey
My Lords, the noble Lord, Lord Saatchi, should not believe everything he reads in the Financial Times. The quotation from Mr Giscard d'Estaing is accurate, but my previous answer stands. Any change of the kind being suggested, whether on the Opposition Benches here or elsewhere, would require changes in the treaty. Changes in the treaty require unanimity among member states and we will not agree to any such change in the treaty. The question of expulsion therefore does not arise.

§ Lord Mackie of Benshie
My Lords, I wonder whether the Minister could clarify—

Noble Lords
Order!

§ Lord Stoddart of Swindon
My Lords, I am pleased that we have just had a straight statement from the Minister that any attempt through the convention or through any other means to have tax harmonisation will be vetoed by this Government. Will the Minister confirm that, because I am a little worried that often Ministers make statements which are later altered? For example, the Government were not going to agree to a written constitution, to a single personality or a 375 permanent president of the European Council. All that has been changed. I hope that vetoing tax harmonisation will not go the same way.

§ Lord McIntosh of Haringey
My Lords, I have spent a number of the past few minutes agreeing with the noble Lords, Lord Taverne and Lord Barnett, who said that elimination of an unfair tax competition is of benefit to this country and that we will support that. Therefore, if the noble Lord, Lord Stoddart, wants an absolutely unequivocal statement by this Government that we will not agree to any measure which will bring our tax rates or tax base closer to that of other member states, he cannot have it.

§ Lord Newby
My Lords, does not the debate demonstrate why there is an urgent necessity to have a constitution for the EU? In the absence of such a constitution and of certainty on such matters, we engage in the same repetitive and debilitating discussions.

§ Lord McIntosh of Haringey
My Lords, I respond to Questions which are put to me in this House. I would never call them repetitive or debilitating. However, the question of a European constitution is wide of the Question on the Order Paper.