Question to the HM Treasury:

To ask Mr Chancellor of the Exchequer, whether the lower rates of withholding tax for dividends and royalties in the UK’s new tax treaty with Lesotho will benefit Lesotho’s economy.

By governing the taxation of cross-border income flows in a predictable manner and eliminating double taxation and excessive taxation, tax treaties promote international trade and investment, to the benefit of both countries’ economies. High withholding taxes are distortive and can exceed the net economic reward for investment, deterring cross-border investment and depriving the economies of both countries of its benefits. It is for each country that is party to a tax treaty to decide what approach it is happy with. However, given the long timescales, complex and shifting interactions with domestic law, large and unpredictable behavioural effects and the lack of a sensible comparator, it is not possible to produce meaningful estimates of the UK revenue effects of double taxation agreements, let alone the effects in the other country, and successive Governments have never attempted it.