There were raised eyebrows across the House of Commons yesterday as senior minister Brandon Lewis admitted that a new government bill published today “does break international law in a very specific and limited way”.
The head of the Government Legal Department – the most senior non-political lawyer in Whitehall – resigned over the decision, which is set to change parts of the Withdrawal Agreement negotiated with Brussels.
Mr Lewis said there was precedent for doing this, in the form of the 2013 Finance Act. But his account of what happened in that case doesn’t seem to add up.
Mr Lewis told the House: “There are clear precedents for the UK and indeed other countries needing to consider their international obligations as circumstances change.”
He continued: “And I would say to Honorable Members here, many of whom would have been in this House when we passed the Finance Act in 2013, which contains an example of treaty override, it contains provisions that expressly disapply international tax treaties to the extent that these conflict with the general anti-abuse rule”.
The Northern Ireland secretary suggested that MPs should be comfortable with the idea of passing domestic legislation that breaks international law because many of them have done it before.
What Mr Lewis didn’t mention is that at the time the 2013 Finance bill was being debated in Parliament, the government was insisting that the “general anti-abuse rule” (GAAR) it contained did not violate our existing international obligations.
David Gauke, who was then the minister in charge of tax legislation, stated categorically in a debate in April 2013: “The GAAR does not override UK tax treaties. Given the lack of time, I will not go into further detail, but it acts in much the same way as GAARs do for other countries that respect OECD and UN model tax treaties.”
And when the 2013 Act was still a draft bill, a senior HMRC official told the Select Committee on Economic Affairs: “we believe that the GAAR does not override our international obligations. […] We really do not see that there is an issue there.”
So at the time they were voting on it, MPs were assured by the government that passing the legislation would not breach international commitments.
That’s a very different situation to the one the current crop find themselves in today, with the government making no bones about the fact that their plans would do just that.
The actual question of whether the 2013 Finance Act did violate international treaties is a little more complicated. In short, the answer appears to be that it did not.
Guidance from the Organisation for Economic Cooperation and Development (OECD) at the time said that “as a general rule, there will be no conflict between such rules [as the GAAR] and the provisions of tax conventions”.
And that’s still the position of the architects of the GAAR. Then-chancellor George Osborne, ex-minister David Gauke and Judith Freedman, who is a Professor of Tax Law at the University of Oxford and was one of the experts advising the government on the rules at the time, have all pushed back against Mr Lewis’ comments yesterday.
Professor Freedman told FactCheck: “I would argue that there is no override [in the 2013 Act] because there is no conflict in the first place”. She said: “Domestic anti avoidance provisions [like the GAAR] are not inconsistent with treaties provided they are targeted and drafted in the right way, which in my view and that of all involved with the legislation, ours was.”
Senior minister Brandon Lewis told the Commons yesterday that the government’s forthcoming Internal Market bill will “break international law”.
The Northern Ireland secretary suggested MPs should be comfortable with the idea of passing domestic legislation that breaks international law because many of them did so when they ratified the 2013 Finance Act.
But at the time MPs passed that bill, it was the government’s expressly stated position that the legislation did not violate our international obligations. That’s a different proposition to the one Mr Lewis is making to MPs now by asking them to pass a law that knowingly violates an international treaty.
Indeed, three of the architects of the legislation in question – two ex-ministers and one professor of tax law – have all rejected Mr Lewis’ claim that the 2013 Act broke international law to begin with.