Clause 180 - Controlled foreign companies and foreign permanent establishments

Part of Finance Bill – in a Public Bill Committee am 4:30 pm ar 19 Mehefin 2012.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of David Gauke David Gauke The Exchequer Secretary 4:30, 19 Mehefin 2012

It is a great pleasure to serve under your chairmanship, Mr Bone, and if I may, I will briefly respond to the points raised in the debate, having already set out in some detail earlier today the rationale behind the policy.

Her Majesty’s Revenue and Customs and the Government provide assistance more broadly to developing countries to help them increase their tax capacity, and I would be happy to elaborate on the remarks that I made this morning and set out for the benefit of the Committee some of the work that is done by DFID—or HMRC, because the two Departments work closely together. This country has a proud record in assisting developing countries in developing their tax capacity, and we are keen to continue with that. My hon. Friend the Member for Bristol West pressed me on that point, and I am happy to confirm that the Treasury, HMRC and DFID will continue to work closely on that issue. The Department for Business, Innovation and Skills also has an interest in the area, and we will continue to work across the Government.

Issues were raised about the economic benefit resulting from reform of the rules on controlled foreign companies. I shall refer back to my earlier speech. Once the new rules come into effect, we expect to see even more companies locating or relocating their business activity to the United Kingdom. That will have wider economic benefits, with new jobs created and increased investment in the UK, which I hope all parties will welcome.

How will we assess the benefits of the provision? Of course, the Government routinely publish detailed information on the corporation tax system and detailed statistics on corporation tax receipts. The Office for Budget Responsibility publishes information on corporation tax forecasts and the economic and fiscal outlook. At the Budget, HMRC publishes detailed information on any proposed changes, particularly tax information, as well as impact notes and policycosting documents.

We have introduced a greater degree of transparency and put more information in the public domain than in the past. I understand that the Opposition will press for further reviews, but we have taken substantial steps forward in terms of transparency.

On keeping the regime under review, the Government meet business and professional tax advisers in a number of forums, such as the corporate tax liaison committee, the Business Forum on Tax and Competitiveness, which met this morning, and the Business Tax Forum. Interested parties have the opportunity to raise their concerns about any matter in those forums, including CFC reforms.

I was asked whether we should subsequently make a commitment to an impact assessment. Tax returns for the first three years of this regime will not be available until 2017 or later, and HMRC does not have the power to obtain information about other countries’ tax affairs. I have made that practical point in relation to other amendments.

Behavioural assumptions have been made in estimating the costs, including the cost of restructuring, but no specific assumption of additional tax, in line with the usual prudent basis for cost estimation, has been included.

Any profits derived from UK operations are robustly defended by the rules. Indeed, there is improved targeting  of UK profits, compared to the previous regime. We are excluding foreign profits, which is consistent with the overall move to territoriality.

I thank my hon. Friend the Member for Amber Valley for his support on where we have got to. Careful consultation and deliberation have been needed during this long process, and at times there has been criticism of where we have got to. In the previous Parliament, there was significant criticism of what was happening with regard to CFCs. However, we have got to a good place now, where businesses appear to be enthusiastic, and we anticipate their relocating to the UK, which all Committee members should welcome.

In such debates, it is right for Committee members to probe and ask questions, and there have been a number of thoughtful interventions from Members of all parties. However, if the Opposition wish to oppose reforming CFC legislation, that will do them no favours, in terms of business reaction. When there are announcements about businesses locating or relocating themselves in the UK, the Government will be tempted to say that that is happening as a consequence of a policy that was opposed by the Opposition. It is for the Opposition to decide whether, politically, that is a sensible place to be.

I would rather not make such partisan points. I would rather we sent a clear signal to businesses around the world that there is unanimity within the UK and a shared desire to reform our CFC regime to ensure that Britain is open for business, and to say that we want to attract businesses to the UK. Whether we can send that message is up to the Opposition. I can say, on behalf of the Government, that we are pleased with the progress that we have made. This is a substantial step forward, in terms of making our tax system more competitive. I commend the clause to the Committee.