HL Deb 20 October 2004 vol 665 cc773-5

3.1 p.m.

Baroness Noakes asked Her Majesty's Government:

Whether they believe that United Kingdom tax law complies with European Union law.

Lord McIntosh of Haringey

My Lords, the Government are confident that our existing tax rules comply with Community law.

Baroness Noakes

My Lords, I thank the Minister for that brief reply. I am sure he will be aware that estimates of the amount of UK tax that is at stake in the cases currently heading for the European Court of Justice are up to £20 billion, and that member states lose 85 per cent of cases that go to the ECJ. If we are to bow to Brussels with regard to our tax laws, does the Minister agree that that will open up another black hole in the Government's finances, which will mean either that the golden rule will be bust through extra borrowing or that taxes will be raised?

Lord McIntosh of Haringey

My Lords, I am as aware of the source of the Question as is the noble Baroness, Lady Noakes. I am aware of the PricewaterhouseCoopers report, and I am aware of the motives of those—not PricewaterhouseCoopers—who wish to encourage firms to take action against the United Kingdom Government in the European Court of Justice. Indeed, two cases now before the European Court of Justice have not yet been decided, and it would be inappropriate for me to comment on them or on any speculation—it is no more than speculation—about the cost to the Exchequer.

Lord Newby

My Lords, the most topical issue concerning UK taxation and practice in relation to EU law has arisen this week. It relates to the fact that the Treasury is facing legal action following the practice of Customs and Excise in seizing vehicles which have been returning to the UK full of booze or fags. Can the Minister give the House an assurance that HM Customs and Excise and the Treasury are acting with due speed to give a satisfactory response on the issue?

Lord McIntosh of Haringey

My Lords, unless that is a question about tax law, which I do not think it is, it does not really relate to the Question on the Order Paper. If it were a question about tax law, I should like to know in which direction the noble Lord, Lord Newby, is pushing us. Is he, for example, urging us to reduce our duties on alcohol and tobacco in order to get closer to other European countries? I hope that the Liberal Democrat Party will make a statement on the matter.

Lord Pearson of Rannoch

My Lords, does the noble Lord agree that, under the anti-discrimination clauses of single market legislation—particularly Article 44 of the TEC—the Commission or another member state could go to the court and claim that our direct tax system was discriminatory? If the court were to agree with that, would the Government accept that that would require us to change our direct tax system into a more European model?

Lord McIntosh of Haringey

My Lords, direct taxes have not been prominent in the issues raised by this Question. As the noble Lord, Lord Pearson, well knows, there are, at the margin, a few measures which are subject to qualified majority voting, but the only cases which have occurred in the courts have been the Fiscalis case and the Excise Movement and Control System case. If and when we are condemned by the European Court of Justice, we shall take appropriate action, but we have not been condemned.

Lord Lawson of Blaby

My Lords, does the noble Lord agree that, while the question of the noble Lord, Lord Newby, was somewhat confused, tax law is very clear that anyone can take unlimited quantities of cigarettes or booze into this country, provided that they are for his or her own personal consumption? Will the Minister instruct Customs and Excise to cease imposing on people who bring in such goods its own ideas of what is appropriate for one's own personal consumption?

Lord McIntosh of Haringey

My Lords, if a Question were to appear on the Order Paper about the issue, I should love to give examples of the many thousands of cigarettes which are claimed to be for personal use in a number of cases where travellers have been stopped by Customs and Excise. I regret that, as it is not part of this Question, I have not come armed with those delightful facts.

Lord Willoughby de Broke

My Lords, will the Minister tell the House the Government's position on harmonisation of VAT rates in this country with European rates? What will their position be if there is to be such harmonisation?

Lord McIntosh of Haringey

My Lords, we observe the directives on VAT rates, as do all other member states.

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