Taxation (International and Other Provisions) Bill

My Lords, I thank the Minister for introducing the Bill and I am sure that he will join me in rejoicing that we are reaching the end of the road with tax law rewrite Bills. I think that this will be the last one to be completed, as the one relating to corporation tax, which we will debate next week, is a money Bill and will have all its stages taken together. I have not taken part in the proceedings on all of them but it feels as though I have. As the Government have already announced, enthusiasm for further rewrite Bills has all but evaporated in the tax professionals community—that community having contributed massively to the success of the project. So, having cost some £37 million in direct costs and taken the best part of 15 years, the rewrite process is coming to an end. I remind the House that the project was initially kicked off by my right honourable friend Mr Kenneth Clarke when he was Chancellor of the Exchequer. It was overseen by a steering committee chaired first by my noble and learned friend Lord Howe of Aberavon and then by my noble friend Lord Newton of Braintree, who I am glad to see is in his place this evening. That steering committee was supported by a vastly experienced consultative committee. One way or another, anyone who is anyone in the tax professional world has been involved in this project. Of course, we must not forget the Joint Committee on Tax Law Rewrite Bills, to which the Minister referred. The committee was initially chaired by my right honourable friend Mr Kenneth Clarke, until he joined our Front Bench in another place. As the Minister said, his place was taken by my honourable friend Mr Andrew Tyrie. I join the Minister in paying tribute to all those who have laboured on this project over the past 15 years. It has been a very remarkable achievement. Noble Lords will, I hope, note the strong Conservative involvement in the rewrite process from its very inception. This is no accident. A simplification of the tax code is an aim that we have long espoused. It is a matter of some regret to us that the past dozen years have seen the average Finance Bill more than double in size, and we now have the longest tax code in the world, which is not a title to be coveted. Recent years have seen some of the most complicated tax legislation in our history. Sometimes the tax legislation is introduced in one year and then subjected to major revision and alteration over subsequent years as layers of complexity and obscurity are added. This is usually done in the name of tax avoidance but it is sometimes also due to the well known dangers of legislating in haste. If anyone has any doubt about the complexity of our tax system, they need only open the Bill randomly to see if what is there is easy to understand. I do not doubt that the painstaking way in which tax legislation has been reformulated has genuinely made complex tax law easier to follow but it does not mean that it has made tax law simple by a very long way. When preparing for this debate I read annexe 1 of the Explanatory Notes, which explained why 15 small changes to the law were being proposed. The sixth change takes over two pages to explain the horrendously difficult interaction between income tax, capital gains tax, double tax relief and gift aid. This is what happens when good things, known as reliefs, come up against not so good things, like tax payable. These are the easier bits of the tax code. The rewrite project found a way to deal with this point. Its very complexity reinforced my conclusion that our tax code is overcomplex. It might be fun but I will not test the Minister’s detailed understanding of this Bill. However, I will test him on the Government’s attitude to simplification. The Government have not shown any real understanding of the need to simplify the tax code. This is a much bigger project than rewriting complicated tax legislation in easier language. Tax simplification requires a wholly different approach. It requires reliefs to be reduced in number, since it is the so-called abuse of reliefs on which much tax avoidance is based, which has led to the volumes of anti-avoidance legislation. Simplification may also require a general anti-avoidance rule, although opinions are divided on this and such a rule can be very complicated to administer. Our own policy, which was developed by my noble and learned friend Lord Howe, who has long promoted tax simplification, has two elements. The first is an office of tax simplification, which would be a permanent office with the task of preparing proposals for simplification on a long-term basis. It would work systemically through the tax code, making proposals for change. The second element, which would start to pay dividends very early, is much better scrutiny of tax legislation through the commitment to introduce tax changes only at the Pre-Budget Report and to allow time for proper scrutiny and consultation before the scrum of the Finance Bill process. A lot of bad Finance Bill provisions have had to have major, and not always successful, changes made during its passage. Earlier scrutiny would avoid much of this. Importantly, our proposals would involve Members of your Lordships’ House, who I know contribute much to the careful scrutiny of tax legislation. What policies do the Government have for simplification? Wearing my tax anorak, I was initially excited to see that the Government this week launched a tax framework for business. However, I was less impressed when I saw that this framework ran to only two pages and that the principle of simplicity was not exactly a fulsome commitment. It was rather more something to be considered alongside everything else. I do not know whether the Government also plan a tax framework for individuals but, if it is like the business one, it is probably not worth the effort. What is the Government’s tax manifesto for the next Parliament? If it is no more than this new business framework, I believe that our tax code will implode if the Government are returned to power. We are content with this Bill. The process leading to it was well tried and sound. The Minister in another place gave assurances in response to the prompting of my honourable friend Mr David Gauke that the Henry VIII provisions in Clauses 375 to 377 would be used only in conjunction with the steering and consultative committees, which we are satisfied with. This is not the last time that we will see this Bill because, as the Minister said earlier, it is not certified as a money Bill, unlike the Corporation Tax Bill, which we will debate next week. We know that we cannot challenge the Speaker’s certificate on a Bill as a money Bill, as we noted on considering the Fiscal Responsibility Bill just before the recess and, equally, we cannot challenge the lack of a certificate on a Bill. I hope we might be allowed a moment of reflection on why this Bill is not a money Bill when set alongside the Fiscal Responsibility Bill debated two weeks ago and the Corporation Tax Bill to be debated next week. The distinctions between the Bills are subtle and the Speaker clearly has a hard task in deciding whether to give or to withhold his certificate. I am told that in 1910 there was a proposal for a committee to assist the Speaker in that difficult task and that that committee would have included Members of your Lordships’ House. One hundred years ago, those proposals came to nothing and appear not to have been revived since. Perhaps this is a topic to be revisited if we ever see comprehensive reform of your Lordships’ House. I do not expect the Minister to respond to that but I shall leave the topic hanging in the air for another day, in another context.