Q131 Mr Khan: Should we be concerned about the offshore tax shelters?
Mr Kingman: I am not sure whether-
Q132 Mr Khan: Are investors taking advantage of them?
Mr Kingman: I do not know. As I said earlier, there are very tight constraints on what the Treasury can know about the affairs of individual taxpayers.
Q133 Mr Khan: One way in which we can reap some of the proceeds of the sale of shares is by revenue-yes?
Mr Kingman: Tax revenue, yes.
Q134 Mr Khan: Are you surprised that I am extremely surprised that you have no idea whether some of these investors are using tax shelters to reduce the amount of tax they pay?
Mr Kingman: I do not know whether to be surprised that you are surprised. What I am saying is that there are very tight constraints on what the Treasury can know about the affairs of individual taxpayers.
Mr Khan: I am afraid that my time is up.
Q135 Chairman: Would you be surprised to know that when I started asking for shares and refinancing, the Treasury told me that it would frighten away investors? Is not that what you are saying about this second proposition from the Comptroller and Auditor General?
Mr Kingman: All I can say, Chairman, is that I believe that these are different kinds of things and that it would be a very big step to move into that space.
Q136 Mr Bacon: I shall start with the NAO question, if I may. Sir John, thanks to Mr Williams, in the first instance, we have been looking at PFI refinancings for some time now. I follow on from Mr Khan's question about paragraph 3.6, which says that equity sales from selling shares would "potentially" be subject to taxation, thus implying that they might not be. Is what you are suggesting in the Report roughly this: now that there is a voluntary code and now that companies who refinance are subject to that voluntary code and will share their refinancing gains 70:30 with the taxpayer-the public sector-there is an extra incentive, which may not previously have existed, for companies, in order to get all the gain, rather than to have to share some of it with the public sector, to leave the uncrystallised refinancing gain inside the project and sell the equity in the project to somebody else, and in so doing, sell it through a tax-efficient vehicle overseas so that they can keep, effectively, all the gain? If you like, there is an incentive to shift away from initial refinancings towards equity sales. Is that what you are basically saying?
Sir John Bourn: Certainly that might be a possibility and what a company might seek to do, but if you take, as it were, the gain by selling shares, you take it from somebody else rather than from the taxpayer. Somebody else then, in a sense, is financing your gain, and having bought the shares, he will hope to make some gain or create some advantage, otherwise he would not do it. On the question of taxation arrangements, it applies to commercial arrangements generally. Companies, in whatever line of business, will think about their taxation position and try to arrange to be taxed in one jurisdiction or another in accordance with the estimates that they make about the advantage to them-whether it is a PFI proposition or a general commercial proposition.
Q137 Mr Bacon: Mr Kingman, I think you were quoting a Member of the Committee, although I am not sure whom, when you said: "We didn't have much in the way of negotiating power." Will you say why you or the authorities concerned did not?
Mr Kingman: Simply because we had no contractual rights to any of the gains.
Q138 Mr Bacon: That is what I thought. Elsewhere, you said that there was no entitlement to any of these gains.
Mr Kingman: Yes, correct.
Q139 Mr Bacon: But elsewhere you said that the private sector was already very highly incentivised to go after those gains, and earlier you said, "We think it is correct that major value for money issues can arise." If the private sector is already highly incentivised to go after the gains and we think it correct that major value for money issues can arise, why were not provisions included initially in the contracts to ensure that there was a right to a share of the refinancing gain?
Mr Kingman: Clearly, it would have been better if they had.
Q140 Mr Bacon: Why were they not?
Mr Kingman: I am afraid that I am not in a position to answer.