European Communities (Definition of Treaties) (Cooperation Agreement between the European Community and its Member States and the Swiss Confederation to Combat Fraud) Order 2006

rose to move, That the draft order laid before the House on 19 December 2005 be approved [14th Report from the Joint Committee]. The noble Lord said: My Lords, I hope the House will be able to support this order so that the EU/Swiss anti-fraud agreement can be specified as a Community treaty for the purposes of the European Communities Act, so enabling its ratification by the UK. It may help noble Lords if I briefly outline the background to this order and explain why the Government consider it important that the UK ratifies the EU/Swiss anti-fraud agreement at an early date. The purpose of the agreement is to put in place judicial and administrative co-operation arrangements, including for the exchange of information, between EU member states and the Swiss Confederation. This will enable both parties to more effectively combat fraud and other illegal activities in a number of areas, including the trade in goods and services, the charging and retention of structural funds, public procurement and in respect of money laundering. Critically, it will enable the UK to co-operate with the Swiss in order to deal with trade and illegal activities that are contrary to VAT and excise legislation. It should be noted that it does not apply to direct taxes, which for the UK are covered by separate bilateral co-operation and information exchange provisions. When ratified and adopted, the agreement will substantially improve the existing administrative co-operation arrangements between the UK and the Swiss authorities by bringing them fully up to the level of co-operation that the UK enjoys with other EU member states. It also introduces EU standards of judicial co-operation with Switzerland, enabling us to more successfully investigate and prosecute major frauds. I should add that this Government led the way in seeking an EC negotiated settlement with the Swiss. By working with our EU partners, we have been able to secure a much better agreement than might otherwise have been the case. I draw your Lordships’ attention to why I particularly welcome the agreement and consider that its ratification would be of benefit and value to the UK. Noble Lords may be aware that the UK has suffered considerably from attacks on the VAT system by carousel and missing trader intra-community—MTIC—fraud in high-value goods such as mobile telephones and computer chips. Because of the multinational dimension of this type of fraud, effective arrangements for the exchange of information and judicial co-operation between countries are essential. There is evidence that criminals are now targeting their efforts towards non-EC countries because improved intervention and co-operation strategies within the EC are working. Switzerland, with its central geographical location and restrictive banking regulations, is seen by fraudsters as an ideal country to use as a base for their operations, or as a country through which to divert goods. A key aspect of the agreement will be that HM Revenue and Customs will be able to request information, including details of banking transactions, on the individuals who are behind the frauds but are not necessarily named as the owners of the goods in the fraud carousel. This evidence will enable substantial amounts of VAT to be withheld from the fraudsters involved. Currently it is thought that a number of Swiss-based individuals are involved in VAT MTIC fraud relating to losses in the UK. If HM Revenue and Customs can use the same investigative and intelligence tools as are currently available to tackle intra-EC fraud, we believe this could have a significant impact on these Swiss-linked frauds. Once it has been ratified and introduced, this agreement will significantly improve the ability of the UK authorities to make use of information held by the Swiss authorities and so enable them to more effectively fight VAT MTIC fraud as well as other indirect tax and customs frauds that cost the UK large sums of revenue. This order fulfils a necessary legal requirement before the UK can formally ratify the agreement. It is an important agreement which will greatly assist in our efforts to fight fraud. I beg to move. Moved, That the draft order laid before the House on 19 December 2005 be approved [14th Report from the Joint Committee].—(Lord McKenzie of Luton.)