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Finance Bill

Absolutely. One crucial aspect is the role played by the private sector in bringing investment into this country. Accepting a new framework that deterred that could significantly damage our competitiveness and the foreign direct investment of which the Government are so proud. There is a slight undertone in the Bill suggesting that some of the structures commonly used in the venture capital industry are somehow dodgy because they have a foreign or offshore component. That is a misconception. Not only have those structures been in long-established use with the knowledge of the Revenue—after negotiations with the Revenue—but they are not, in the main, designed to avoid or reduce tax liability. They are simply convenient legal structures to facilitate foreign investment. On that ground alone, the Government are wrong to stigmatise such arrangements. Although it is not stated explicitly, there is an implicit suggestion that the use of special purpose vehicles or offshore holding companies is in some way nefarious. In fact, it has proved to be an efficient way of attracting the foreign direct investment that is so vital to the effective functioning of our economy. Amendment No. 19, which the Minister discussed at some length, is one of the most important illustrations of a broader point that I have tried to make: that the provisions, while making a degree of sense in some ways, are too widely drawn. The Minister did not accept the need for further clarity and a more precise formula, which is the aim of the amendment. He said that he thought that there would be too much inflexibility, that some circumstances would not be covered properly by a black letter-type formula and that there should be a less prescriptive approach. We need more certainty and clarity in tax legislation than in other legislation. It is a basic tenet of not just tax law but our constitutional settlement that, if the Government are to deprive citizens of their money, they must ensure that their legislation is very clear indeed. They are under more of a burden to provide clarity and certainty in that area than in any other area of our legal system. The background to that is Parliament’s constitutional struggle with the Executive to ensure that citizens were not taxed without due constitutional process and the acceptance of Parliament. On that ground alone, clarification of this fundamental part of the Bill is vital. How is it to be decided whether a transaction is on an arm’s-length basis? I urge the Committee to look carefully at amendment No. 19. I hope that the Minister and the Government will deem it a constructive contribution to ensuring that venture capital funds have a better idea of what the Bill is designed to do and that the Bill does nothing to damage a vital sector: the flourishing investment sector that is so important to the health of our economy, the health of enterprise and the health of business start-ups.