DUP silence allows Finance Bill amendments through

Divisions over the government’s Brexit agreement has caused Northern Ireland’s Democratic Unionist Party (DUP) to deliver a stinging blow by failing to back the government on amendments to the Finance Bill proposed by opposition parties

The DUP’s abstention allowed Labour to propose two amendments which were accepted. The first, amendment 23, called for a report on how clause 83 on cross-border tax arrangements 'is to be exercised in the case of a negotiated withdrawal from the EU, and in the unlikely circumstances of a no-deal situation'.

Clause 83 of the Finance Bill 2018-19 (FB 2018-19) covers disclosable tax arrangements under international tax enforcement and allows the Treasury to 'make regulations to require disclosure of information about certain cross border tax arrangements to HMRC', allowing the UK to implement the 'mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements'.

The second Labour amendment, clause 5, requires the Chancellor ‘to carry out and publish a review of the effects of the tax avoidance provisions of the FB 2018-19 on households with different levels of income, on child poverty, people with protected characteristics and on a regional basis’. FB 2018-19 contains nine measures that tackle fraud, avoidance and unfair outcomes and are designed to raise an additional £2.1bn by 2023/24.

According to Anneliese Dodds MP, such an assessment is necessary ‘because of the continuing leakage from our tax system owing to avoidance as well as evasion’. She said that failure to deal with avoidance has put pressure on working families.

A new clause 14, proposed by the Scottish National Party (SNP), was also passed. It called for a review of the effect of the tax avoidance clauses in the FB 2018-19 on reducing tax avoidance and evasion and on 'inducing new tax avoidance measures unanticipated by the Act', and for estimates of the impact of the clauses on the tax gap.

The passed amendment means that the Treasury 'must review the effectiveness of the provisions of this Act relating to tax avoidance and lay a report of that review before the House of Commons within six months of the passing of this Act'. The review must also consider 'the effects of those provisions in inducing new tax avoidance measures unanticipated by the Act', and 'estimates of the efficacy of the provisions in reducing the tax gap in each tax year from 2018-19 to 2028-29'.

This is the second defeat for the government regarding FB 2018-19. It was originally proposed in the Bill that a reduction to the maximum bet on fixed-odds betting terminals (FOBTs), from £100 to £2, would happen from October 19. This prompted the resignation of sports minister Tracey Crouch and provoked an amendment which was passed without opposition, changing the date to April 2019.

A spokesperson for CIOT said ‘This is pretty much unprecedented for a Finance Bill in modern times and represents a significant change in the balance of power between the government and parliament, for the time being at least. In effect we now appear to have a minority government with all the implications of that for political certainty.

‘It will be interesting to see how substantial the reports the government publish will be, particularly on the effectiveness and effects of the tax avoidance measures. It is quite possible these will be damp squib - a few sentences saying the government expect the measures to be effective and they do not think they will particularly impact child poverty, etc other than avoiding tax leakage.

‘The implications for the rest of committee stage are unclear until we see whether the government will have a majority on the standing committee. Based on precedent it is likely they will. But the report stage in December will almost certainly see new attempts to defeat the government.’

The government’s control of the House of Commons is permitted only by a confidence-and-supply agreement reached with the DUP following 2017’s General Election, under which the government promised an additional £1bn in funding for Northern Ireland.

The DUP opposes a key aspect of prime minister Theresa May’s proposed agreement with the EU, released last week, which contains a border backstop. This aims to maintain an open border between Northern Ireland and the Republic of Ireland, allowing for the trading of goods and services between the two jurisdictions with few restrictions. The DUP believes that this arrangement would shift Northern Ireland into EU customs territory and further separate it from the UK.

Report by James Bunney

 

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