HC Deb 13 July 1914 vol 64 cc1578-647

Income Tax in respect of income arising from securities, stocks, shares, or rents in any place out of the United Kingdom shall, notwithstanding anything in the rules under the fourth and fifth case in Section one hundred of the Income Tax Act, 1842, be computed on the full amount of the income, whether the income has been or will be received in the United Kingdom or not, subject in the case of income not received in the United Kingdom to the same deductions and allowances as if it had been so received and to a deduction on account of any annual interest or any annuity or other annual payment payable out of the income to a person not resident in the United Kingdom; and the provisions of the Income Tax Acts (including those relating to returns) shall apply accordingly:

Provided that this Section shall not apply in the case of a person who is not a British subject, nor in the case of a person who satisfies the Commissioners of Inland Revenue that being a Britih subject he is ordinarily resident in a British Possession.


I propose to take as the first Amendment that standing in the name of the hon. Member for Colchester (Mr. Worthington Evans), to leave out the words "place out of the United Kingdom," and to insert instead thereof the words "foreign country." This Amendment, I think, covers a number of the points in other Amendments, so I will reserve any decision with regard to the Amendments that follow until I have heard the Debate on the first.


I beg to move to leave out the words "place out of the United Kingdom" ["in respect of income arising from securities, stocks, shares, or rent in any place out of the United Kingdom"], and insert instead thereof the words "foreign country."

May I take it we shall be allowed to have a general discussion on this first Amendment? May I remind you, Sir, that there was no Second Reading Debate at all on Clause 5? It was introduced by the Chancellor of the Exchequer in the course of his Budget Speech, but there has never been a Second Reading Debate. I think I am right in saying that not one single speech in regard to Clause 5 has been made, except the very few remarks of the Chancellor of the Exchequer in his Budget Statement. I think it will be for the general convenience if you allow us to range rather widely on this Amendment, and, incidentally perhaps, to deal with other Amendments, of course not repeating the arguments afterwards when we come to deal with individual Amendments.


I have selected this Amendment for that reason. I think it will give a wide scope to the discussion, and that all the points referred to by the hon. Member will really be relevant to this Amendment.


I think it would be for the convenience of the Committee if I first state broadly what the effect of Clause 5 is, and remind the Committee of what the Chancellor of the Exchequer proposed to do by introducing this Clause. The Committee will remember that this is an entirely novel proposal with very far-reaching effects, and one which is expected by the Chancellor of the Exchequer to raise a fresh source of taxation amounting to something over £1,000,000 in a full year. The Chancellor of the Exchequer in introducing his Budget said he hoped to get revenue which at present escaped under arrangements purposely made by men who are rich enough to leave their incomes abroad for reinvestment. He was asked how he was going to touch these people who had hitherto purposely left their money abroad for the purpose of reinvestment so that Income Tax should not be payable. He replied that he would make it necessary that there should be a declaration with a penalty attached, and that arrears of Income Tax, or Income Tax which had been avoided, would be recovered when Death Duties came to be paid. The Committee will observe, in the first instance, that although this Clause purports to tax incomes which does not come into this country, there is no provision for enacting any penalty whatever in the event of evasion and at the time when Death Duties come to be payable. That part of the Chancellor of the Exchequer's proposal apparently has been considered impossible to carry out, and there are no such provisions in the Bill. I want the Committee to consider who the people are who are to be taxed under this Clause. First, he is to be a British subject who has invested money abroad in his own name and has had that income reinvested. At present he is entitled to escape the payment of Income Tax, so long as that income does not come into this country. On so much as comes in he has to pay Income Tax under the present law. If this Clause was to be effective, to catch those deliberately avoiding the payment of Income Tax, I would welcome it, but I think the case could be made that it assists rather than penalises those who endeavour to escape Income Tax. In my judgment it will be found to catch some, but not those specially intended by the Chancellor of the Exchequer, and those for whom the Chancellor of the Exchequer has devised it will very easily be able to escape the net which he is endeavouring to catch them in.

The present method adopted by people reinvesting money in their own names abroad will be caught by this Clause. But that is not the only method employed at this moment, and if the Chancellor puts his wits and brain against those who think it worth their while to endeavour to escape him, I think he will have to give a great deal more consideration to the Clause than he has given up to the present time. Let me call attention to another method of escaping Income Tax which is at the present moment employed, and which, as far as I can see, this Clause will not operate to prevent. I want to impress upon the Committee the importance, if we are to have this Clause at all, of making it apply to all cases, because it would be obviously most unjust that a clever person should be allowed to escape, and that others, perhaps not so clever, and perhaps rather more scrupulous, should be brought within the Income Tax provisions. I do not think the Chancellor of the Exchequer can justify the Clause unless he can assure the Committee that all these methods of escaping it have been seen in advance and will be covered by the Clause. Let me take one method now employed, what is known as "and or" method. Sums of money are sent abroad and deposited in a bank, or with some investment or trust company, in what is known as the "and or" name, that is, it is put in the name of the previous owner, "and or" his wife, "and or" his son, with directions to the banker or agent to follow the instructions of any one or more of the names in which these investments are deposited. Assume for a moment that these are bearer securities. Instructions are given to the bank to tear off the coupons and to reinvest them, whether in the original investment or not. The instructions say that the banker or agent is to deal with these bonds and their income on the instruction of one or two of those names. What happens? Instructions are given to reinvest that income.

The Chancellor says this Clause is designed to prevent such a case as that. "We do not allow, or intend to allow, anyone to reinvest his income abroad and so avoid Income Tax. He is obliged to make a declaration of what income he has got, and he is to be taxed upon it whether invested abroad or brought into this country." How is he to deal with the "and or" case? Whose income is it that is to be made a declaration of? Suppose the original owner of the bonds has parted with the ownership, because they are bearer bonds, and placed them in the name of anyone of these three people. Who is to make a declaration and to be liable to duty? I confess I should like to hear what the Chancellor has to say to that supposed method of escape. I am by no means sure that there is not an answer, and that he does not catch such a case as this. It might be held that the original owner of these bonds, although he transferred the legal ownership, yet has some equitable claim to them and the interest, and is in some way a beneficiary under Section 13 of the Revenue Act of 1912, and that he might be brought to account, and that this Clause does bring him to account. But I should like to hear very much what the Chancellor has to say. Supposing that method failed, the Chancellor has got to pit his wits against other methods which would be devised. I will only take one case, and ask him whether this Clause will catch people in this particular instance that I will explain. As far as I can see his Clause will not cause income to be taxed, nor will any declaration made enable him to exact any penalty from those who adopt the method that I am going to ask him to consider. For simplicity's sake let me say that a man is an owner of £100,000 which he wants to put out of the country, the income of which he does not require, and which, therefore, he is willing shall be accumulated abroad, but in respect of which he wishes to avoid Income Tax, and therefore to escape the provisions of this Clause. There is a method of doing that which occurred to me the other day, and I cannot see that this Clause can possibly stop it. That man, with his £100,000, transfers that £100,000 of bearer's securities to a Canadian company which he registers for himself. The registration of a Canadian company is a very inexpensive thing, much less expensive than the registration of an equivalent English company. It may have a small nominal capital of 5,000 dollars, if you like. The procedure would be this:

The owner of the £100,000 bonds would hand over to that Canadian company £100,000, and would take instead 5,000 dollar shares, so that he and his nominee would be the sole owner in every sense except the legal sense, of all the assets belonging to that small Canadian company. It is important to distinguish between the legal sense and the general sense of ownership, because a great deal will turn upon that. That man will hold 5,000 dollars in shares in the Canadian company. There is no Income Tax in Canada. The Canadian company holding this £100,000 of bonds will tear off the coupons in due course and accumulate the income of that £100,000 bonds, let us say at £5,000 a year, and that process goes on for eight years. At the end of eight years there will be, with income, about £150,000 of assets belonging to the Canadian company. The owner of the shares in that Canadian company will be able to dictate its policy, what it should invest in and whether dividends are to be declared or not. If he wants to avoid Income Tax he will take great care that no dividends are declared in that Canadian company, and when he comes to make his declaration of Income Tax in this country, he will make his declaration, of course, omitting to include any dividends from the Canadian company, because the Canadian company never declared any dividends, so that the Income Tax declaration will be in order. I challenge the Chancellor of the Exchequer to say whether that Income Tax declaration is right or not. No dividends have been declared by that Canadian company and the very thing which the Chancellor of the Exchequer by this Clause is expecting or hoping to prevent will have been carried on by means of investment in the Canadian company, and although the Chancellor has not been able to translate his proposed device into the Clause now in the Bill, let us see what will happen on the death of that man.

His executors being perfectly honest people, not intending to make any declaration that would be false, will go to Somerset House and say, "We find that the testator has 5,000 dollars in a Canadian company, and that the assets are worth £150,000, and therefore we are giving a value to the 5,000 dollar shares of £150,000, and we propose to pay the full duty upon the £150,000." They need not do that if they wanted to avoid it, but I want to deal with one thing at a time, and I am dealing now only with Income Tax. The people at Somerset House will say, "The capital value of this estate is so and so. When we compare it with the Income Tax returns we find that there was no Income Tax paid upon the value of this £150,000," and they will call upon the executors to explain why no Income Tax was paid on the value of the £150,000. The executors will say, "We put this 5,000 dollars in at a fair valuation, they are the whole capital, and it is a fair way of valuing them," and they will say, "That company, in fact, never declared any dividends during the whole of the eight years, and therefore the testator was perfectly right in his declaration of Income Tax." I ask the Chancellor of the Exchequer how he is going to deal with that method of escape. To use his own words the Chancellor said, "The Clause is intended to catch those who in the past have escaped owing to arrangements pur- posely made," but I ask him how, if that method is adopted, is he going to catch these people. I want to anticipate another answer. The Chancellor of the Exchequer may say, "There must be very few people content to go without their incomes for the purposes of avoiding Income Tax. There will be many who would like to do so, but not many who can afford to see £5,000 a year rolling up abroad." It is quite simple. The same method can be applied by those who really want the equivalent of their income and yet do not want to pay Income Tax upon it. Let us see how that can be done. I am trying to put the matter quite fairly and by practical methods.

For the benefit of hon. Gentlemen opposite who do not like the idea of this £5,000 rolling up, I will show them a second case. We will keep the same figures of the Canadian company registered as before with its 5,000 dollars or thereabouts, and an income from £100,000 bonds, but the owner in England says, "I must not let the company declare a dividend because I shall have to make a decaration, and include that in my Income Tax returns, and be taxed upon it. How can I get that money without paying a dividend?" It is very simple. He simply borrows £5,000 a year from this Canadian, company. Let us see how that works out. I want the Chancellor of the Exchequer to find means of stopping that. This Clause must be fair to all or it ought not to be there. Let me take the case of the gentleman who is willing to allow income to accumulate, but really wants to spend it over here, and does not want to pay Income Tax. The company lends him the £5,000 that it draws in dividends from the bonds. Consider what his Income Tax return is. That is the loan money that he has borrowed, and therefore not money upon which he will have to pay Income Tax.

At the end of eight years let us take the position of his death. He will have borrowed, say, £50,000 from the company. Let me assume again that the company's assets are worth £150,000 at that moment. They would consist of £100,000 of the original bonds, and £50,000 loan owing to the company by the English shareholder. When he dies his executors go to Somerset House, and again they say, "We find our testator has 5,000 dollars worth of shares in a Canadian company. The value is £150,000, but amongst his liabilities there is a sum of £50,000 owing by him to the Canadian Company; that will be a set off, and he will pay duty on £100,000." The result would be exactly the same, as far as Death Duties are concerned, as if he had received the dividends on those bonds which he transferred to the Canadian company. He would, however, have escaped Income Tax and Super-tax. I ask the Chancellor of the Exchequer to deal with that case specifically in his reply, because it will make a very great deal of difference to me, and I think it must to every hon. Member, as to how they will vote upon this Clause. If this Clause is going to catch everybody alike, fairly and squarely, well and good. If, on the other hand, the right hon. Gentleman is going to have a net so full of holes that even the big fish which he sets out to catch are going to escape, and only some of those who under the circumstances ought not to come within the purview of the Clause are going to be caught, then the Clause is so faulty that it will be difficult to support it.

Having shown that there is a large class who will get out of the tax, I want now to deal with the case of some of those who will come within the tax, and are going to be hardly treated in consequence. That is a point more germane to the particular Amendment, and is really the cause of the particular Amendment which I have put on the Paper. This Amendment will not defeat the object of taxing those who send money abroad to accumulate if that object can never be obtained by any form of Clause which the Chancellor of the Exchequer can invent, which at the moment I doubt. It would free income from Colonial investments which are not brought over here. It is important to remember that all income from Colonial investments which is brought over here is now taxed, and would continue to be taxed even if the Government accepted this Amendment. All I ask is that income from Colonial investments which is not brought over here, but reinvested in the Colonies for the benefit of the Colonies, should not be taxed. By all means tax that which comes over here, and if you do that you tax the interest on all the Colonial loans issued over here; and you tax the income and interests from the debentures and share capital of the trading companies registered over here which trade in the Colonies. All that you continue to tax as before, but there are cases which do not come within any of those categories, and those are the cases which I specially want to deal with.

Hon. Members opposite may object to this Amendment on the ground that it is preferential and under it there is some preference to colonists. I agree that it is preferential, but it is only to a minor degree, and I appeal to those who are afraid of treating our fellow subjects in the Dominions better than they treat foreign countries to put their fears on one side and support this Amendment. At the present moment men retiring, or about to retire, from a business they have been carrying on in the Dominions or in the Colonies return to England to reside here for the purpose of educating their children are going to be taxed on the whole of their income, whether brought to this country or not. The Chancellor of the Exchequer has recognised that there is a difficulty and a grievance there, because at the last moment he has put on the Paper a Clause which gives power to the Commissioners to exempt the person who proves that he is not domiciled in this country. The question of domicile is one of the most difficult which lawyers have to face; in fact, it is a regular trap for the unwary. Many men go abroad into the Colonies or elsewhere and never lose their British domicile at all.

Let me give a case which I have in mind. Take the case where there are born in England and their domicile of origin is English. The very reason for their going abroad is to seek their fortunes and get an income, is because they have, a vision that they will come back later and occupy some small property which has been in the hands of their family for a long time. Meantime their property here may be occupied by their mothers or sisters, and afterwards they come home to live in the family house. They never lose their English domicile, even if they are away in the Colonies five, ten, or even fifteen years. After all, domicile is a matter of intention. What is the intention of a man like that The very object of his going out to the Colonies is to enable him to come back, and he never does in law lose his British domicile. The Chancellor of the Exchequer's Amendment must not be taken as a substitute for the Amendment I am moving, and it only affects a few of the cases I want to deal with. Anyhow it is a very bad principle to introduce, that the test of taxation should not be ability to bear the taxation, but should be the question of domicile which may never vary from year to year, and is extremely difficult to ascertain at any one time. Moreover it is putting a sort of premium on those who endeavour to shake off domicile in the United Kingdom. Let me take a typical case which is one of very many, and I will point out what I am trying to do by this Amendment. There are numbers of men who have gone abroad from time to time from Great Britain to be tea planters in Ceylon, farmers in Canada or Rhodesia, or they may be interested in Australia in ranching or in many other ways. Their intention is to live there for a time, to make an income there, and to come back for the education of their children, and finally to finish their life in the old country. There are thousands of such cases. Take a case where a man engaged in any one of these pursuits makes quite a large taxable income upon a relatively small capital. He puts a small amount into produce growing, say, in any part of our Dominions, and his income as measured by the Income Tax Acts may be very considerable. Let us assume that it is even £5,000 a year after a certain period in the Colonies. Habitually he never counts that £5,000 a year as income, because he generally puts it back again into extensions of his plantation or farm, and all he does is to treat a relatively small part of the whole as actual income.

That is no fancy case, in fact it is the life history of nearly every planter. He goes out with a very small capital indeed. He makes a considerable income, but he does not treat it as income, because he keeps on extending his business. When that man comes over here, this Clause is going to say to him, "Your income according to the Income Tax Acts is £5,000 a year, and you have to pay on £5,000 a year, although you have never spent more than a couple of thousand pounds a year." Under this Clause the tax in such a case would be £390 a year, or something like 20 per cent, of the actual income he ever spent or intends to spend. You are making it too expensive a luxury for such a man to come back to the old country, to bring up his children, and give them an education here. It seems to me that that is extremely unwise. Those cases might be multiplied enormously, but even in those cases there is an easy way out if they care to escape by a somewhat devious plan.

In some of the Dominions there is already an Income Tax so that the actual amount of tax that such a man is called upon to pay is a double tax. In South Africa the Income Tax is graduated up to 1s. 6d. in the £, and all companies bear an Income Tax of 1s. 6d. in the £. In New Zealand the Income Tax varies from 6d. to 1s. 2d. in the £, the latter amount being payable on incomes of £2,000 or over. In New South Wales individuals pay from 9d. to 1s. in the £, with one-third extra if it is an unearned income. Unless this Amendment is accepted, you are going to make these people pay a double tax. I do not say that you have no legal right to tax them, but I do say that it is most impolitic and most unjust. It is impolitic and contrary, as I have always understood it, to the best theories of taxation where you have self-governing Colonies, also with the power of taxation. I remember that in the discussions on the Home Rule Bill we had just this class of case. Would not the Chancellor of the Exchequer in this country by interfering with the possible sources of revenue of the Chancellor of the Exchequer in Ireland, and would not the reverse occur if the Irish Chancellor of the Exchequer were given free leave to roam over all the fields of taxation? This is what the Government are proposing as regards the Dominions. The Dominions are now getting revenue by an Income Tax from the very income which the Chancellor of the Exchequer proposes to still further plunder.

I can understand hon. Gentlemen opposite saying that a case may be made out on similar lines for relieving all incomes from foreign places which does not come over here, and that you ought, therefore, to justify specially picking out income arising from other than foreign countries. I have no doubt that the Chancellor of the Exchequer will say, "If I accept this Amendment without any special reason, the next claim made upon me will be to exempt foreign property altogether, and in that way you will destroy the whole Clause." I would like to put before the Committee one or two reasons in justification of the preference. I do not suppose anybody doubts that as a general proposition it is highly desirable that people should be encouraged to invest in the estates of the British Empire, and should be encouraged by their money to develop the estates of the British Empire wherever they are within the British Empire. Nobody will dispute that as a general proposition. Everybody knows that there are vast areas crying out for capital, and, if men go out with capital, many more go out without capital, but with their labour to develop and support the work that is done by the pioneers with capital. I suggest therefore, as a general proposition, that it can be defended on the ground that the preference would add an additional inducement and would strengthen the tendency for emigration within the Empire, and if it does that it will be all to the good. The Amendment would free the individual from arbitrary and often double taxation. It would secure the non-interference by the Chancellor here with the revenue of the Dominions and of India, and it would undoubtedly aid in developing the estates of the Empire. Perhaps I may summarise what I have said in this way: The Clause, as drawn up by the Chancellor, will not catch the rich man who chooses to take the trouble to escape; and, mind, the only justification for the Clause which the Chancellor gave when he introduced his Budget was that it was in order to capture those who were deliberately endeavouring to escape taxation! It will penalise investments in the Dominions, especially where a double tax is payable. It may interfere with the Dominion revenues. And it will especially and unequally affect on their return to the Homeland that large class who have pioneered abroad. I think unless the Chancellor can specifically deal with the methods that I have suggested to him whereby this Clause would be avoided, the Committee ought to feel great difficulty, however much they may be in sympathy with the general idea of not allowing anybody to escape, in supporting the Clause.


I beg to second the Amendment.

I am quite sure that hon. Members in all quarters of the House must feel sympathy with the object the Chancellor of the Exchequer has in view in inserting this Clause in the Finance Bill. His object is to hit a certain number of persons who now, by various means, escape paying their fair share to the revenue of the country, and by that means prevent other persons from paying more than they would otherwise have to pay. I have sympathy with the right hon. Gentleman's objects, but I think it is a Clause which requires very careful consideration. If there ever was a Clause which ought to have had opportunity for full discussion, both outside and inside this House, it is this Clause. It is an entirely novel departure. We have to bear in mind that the Prime Minister the other day announced that he was just about to appoint a Commission to inquire into the whole subject of Income Tax. I really think it would have been wiser, before embarking on this wholly novel procedure, to have referred so difficult and so intricate a problem to that Commission, rather than to have hastily and under the guillotine in the few hours only which are available for the consideration of this matter taken a plunge, the result of which may be to defeat the very object the Chancellor of the Exchequer has in view. The right hon. Gentleman is really taking his aim at crows, and through the haste of his aim a great many of the crows will escape and he will hit a good many pigeons. My hon. Friend the Member for Colchester (Mr. Worthington-Evans) spoke of the crows which the Chancellor of the Exchequer would miss.

Let me say a word or two about one or two pigeons he will hit. One set of pigeons he will hit will be the life insurance companies. They cannot resort to the devices to which my hon. Friend referred, and there are a great many conscientious people who feel it their duty under the law to make their contribution to the revenue of the country, and who would not resort to that sort of practice. At the same time you ought to make your Clause watertight, but if you proceed in such a hurry without adequate consideration, I do not think that you will be able to do so. The life insurance offices will be very hard hit by this Clause. Perhaps the right hon. Gentleman will allow me to put their case before him, because recently he was good enough to receive a deputation from them. They are taxed on their interest at the source, and not upon profits. The amount of the interest in the aggregate is nearly double their profits. The result is that they really pay Income Tax on nearly double the amount of their actual profits. Their interest and dividends are the sources from which they meet their liabilities or claims. They meet their claims from two sources, from the premiums and from the interest on investments, and, in calculating the rates of premiums and the amounts they can afford to pay, they take into consideration the rate of interest they expect to earn from their investments. The offices the right hon. Gentleman will hit hard are the British offices, because the foreign life insurance offices in competition with the British offices here will not be hit by this Clause even if the right hon. Gentleman's Amendment to substitute the word "domiciliary" for the words "ordinarily resident" is accepted. The foreign offices are not domiciled in this country. The British offices will be subjected to this new and special form of taxation, because their investments, which accumulate abroad, and which previously enabled them to escape part of the injustice, will not be able in future to escape, while foreign companies will be able to do so.

There is very keen competition in this country between the British and the foreign offices, and the right hon. Gentleman by this Clause is deliberately handicapping the British offices. He is not only handicapping the British offices in that competition in this country, but he is also handicapping British companies which do business abroad, because, if they do business abroad and have investments abroad, and use the interest of those investments merely for their foreign business, they will be still taxed in this country for the whole of that interest, although the money is actually spent abroad. They are handicapped both ways. They are handicapped in Great Britain in competition with the foreign companies here, and they are handicapped abroad in their competition with the foreign companies there. I really think it is a matter to which the right hon. Gentleman ought to pay very serious consideration, because it is contrary to public policy in a matter of this kind to handicap your own offices where they are in such serious and constant competition with offices elsewhere. Let me put another point which I think requires a little more consideration than the right hon. Gentleman has given to it. I do not know whether the right hon. Gentleman has really considered the effect of the word "rents" in this Clause. In the first place, he seems to be going contrary to a principle of international comity which Sir Wm. Harcourt accepted in the fullest sense when he introduced his Budget in 1894, and which was that immovable property abroad was not to be taxed by any other country except the country in which it was situated. Sir Wm. Harcourt gave effect to that principle by exempting from Death Duties land abroad. Anybody who owns land abroad is not liable to Death Duties at this moment, because Sir Wm. Harcourt accepted the principle that immovable property was the subject of taxation of the country where it was situated, and Mr. Dicey, the great authority on international law, in his book, says:— An Act of the Imperial Parliament never imposes duties in respect of immovable property which is not situated in the United Kingdom. 8.0 P.M.

I quite agree that the right hon. Gentleman proposes, not to impose it on the immovable property, but on the proceeds, the rent of the immovable property, but that rent is never brought into this country, and this country has no justification for taxing it. The person who wants to evade the Income Tax does not invest in real property abroad, because the taxes on real property abroad are already heavy. He renders himself liable to that taxation in any case, and therefore he is not likely to invest in real property abroad with a view of evading taxation. Thus the word "rent" is really inapplicable to the case. In this country there is no Income Tax on rent as such; it would be futile to put one on because all you would have to do to escape would be to pay a fine or premium on the grant of a lease. Abroad an arrangement is made for a premium or fine to be paid on the granting of a lease, instead of rent being paid, and in such cases the double taxation would not apply. The leasehold system does not obtain in foreign States. Entirely different relationships exist, and to these the word "rent" is really inapplicable. What are the deductions which the right hon. Gentleman proposes to allow from the gross rent received abroad? I asked him a question to-day, but I could not follow his answer, and, at this moment, I cannot gather what deductions are allowable. I want to know whether they will be the same as are allowed under Schedule A in this country. If so, these deductions seem to be wholly inapplicable because they are based on the annual value of the land, and not upon rent at all. That also is a point which requires full consideration and elucidation.

I should like to join very strongly with my hon. Friend in the plea he put forward for exempting the British Empire from the provisions of this Clause, if the Clause is to stand part of the Bill at all. Surely it is in the interests of this country to encourage the development of the Empire by bringing in much needed capital to develop its resources wherever it is possible to do so. The Government themselves have shown that it recognises the importance of it, because they have advanced money for cotton growing in the Soudan and for railway construction in Uganda. But, at the same time, if a private individual does it, he is to be liable to double taxation for using his money in developing the resources of the Empire. If he leaves the interest or income arising from it in making further developments of the enterprise in which he is engaged, he is liable to be taxed both in the country in which he has made the investment, and in this country to which he does not bring the income or interest arising from the investment. There can be no justification for that whatever. Take the case of a man developing an estate in Canada. He uses such rent as he receives in making improvements which will further develop that estate. How can it be politic for this country to tax him upon that interest or upon those investments? There is a precedent dealing especially with Colonial investments of this character in the Finance Act of 1894—an important precedent that. I have put down an Amendment which I do not suppose will be reached under the guillotine in precisely similar terms to those used in the Act of 1894. When Sir William Harcourt was dealing with this matter he said, "I must exempt realty altogether, because it is contrary to the principles of international law to impose Death Duties on realty abroad." As far as personalty abroad is concerned, you impose a duty on personalty wherever situate if the deceased was domiciled in this country at the time of death, but so far as the British Dominions are concerned, you make a special exception in Clause 20 of the Finance Act of 1894, which provides that, from whatever duty is exacted in this country, there is a right of deducting any Death Duty charged abroad. If that is fair in the case of Death Duty, surely it is also fair in the case of Income Tax!

If there is an Income Tax in the Colonies in which the interest or dividend is earned and spent, it surely is only right, and as Sir William Harcourt recognised to be fair in the case of the Death Duty, that the actual Income Tax or annual tax of any kind payable in the Colony should be deducted from the Income Tax payable in this country, in order that the man should not be subjected to two Income Taxes in that way within the same Empire. The Income Tax which is raised in the Colony may actually be used for the benefit of the British Empire. Take the case of South Africa, which has just imposed an Income Tax. The imposition of the Income Tax there might be combined with the question whether South Africa should make a naval contribution. The Income Tax levied at the Cape might actually go to help to swell the contribution which is made by the Cape to the Navy of the Empire, and then you tax the same man over again for the Navy in this country on that same income which has been earned and spent at the Cape, and never brought into this country. Surely that is a proposition which is grossly unfair! It is one of those cases where the right hon. Gentleman will be hitting the pigeon while the crows will escape.

I would like again to press on the right hon. Gentleman the contention that this is a matter which requires very careful consideration. It is a subject that might be well deferred to the Royal Commission, the appointment of which the Prime Minister has just announced. It is eminently a matter which should be fully settled before we take any step in regard to it. It would be most unsatisfactory to pass a Clause and let it stand part of the Bill after being only half discussed—for there is no chance of our being able to discuss all the points arising on it—and in the case of a Clause introducing such a novel principle, I think it would be far more reasonable for the right hon. Gentleman to wait until it has been considered by this Commission, especially as he himself admits that this year it will produce very little revenue indeed. The difficulty which has arisen in connection with foreign investment has been realised for a very long time, and no Chancellor of the Exchequer has yet taken any steps to deal with it because of the very great difficulty of bringing forward any Clause which would really be watertight and which would effect the object in view. It would seem most rash and foolish, therefore, to choose the very moment when you are going to appoint a Royal Commission to inquire into the whole matter to first pass, without asking the opinion of that expert tribunal, a Clause imposing new taxation and then to inquire whether it is just or can possibly be put into operation.


We have had a very interesting dissertation from the hon. Member for Colchester (Mr. Worthington Evans) on the ways in which payment of this tax might be avoided. I prefer to use the word "avoided" to "evaded." There can be no question about it that a good deal of ingenuity will be devoted to avoiding this tax, and I am sure the hon. Gentleman's remarks will be read with a good deal of interest. But I am not quite so sure that many people will avoid this tax under this suggested Canadian company scheme, although the private individual might be able to do so. The hon. Member did not touch upon one point upon which it would be interesting to hear him; it is this: In the case of private firms or in the case of public companies, and especially in the case of insurance companies, where they will have to bring into their revenue accounts something corresponding to this accumulation that has taken place abroad—insurance office accounts have to be made out in the form laid down by Act of Parliament, and they will have to bring these accumulations abroad into the account each year in some way or other—if they bring it in as interest, then I think they will have to be taxed upon it. If they bring it in as profit on the investment—and I do not see in what other form they could get it in—they will, of course, be taxed upon it as profit. I am not quite sure the Clause is watertight in connection with all such schemes, but I believe it would be for private individuals. With regard to the other suggestions referring to the investments of people who have been resident in the Colonies and have come here, that seems to me to be simply another form of Colonial Preference. I see some difficulties about it. Suppose this money were a foreign investment, but collected by a bank in Montreal and received here from Montreal, it would not be a Colonial investment in reality, but I think there would be some difficulty in the Inland Revenue people separating it and tracing it.

Further reference was made to the case of the Colonial planter who makes £5,000 a year and invests £3,000 in developing his business. We are told that that becomes capital, and, therefore, ought to be spared the Income Tax upon it. But surely that case is not peculiar to the Colonial planter. Every business man in this country who is developing his business and making a suitable income does not regard the whole of his income as income going to be spent in the year. He is continually reinvesting it in his business and building up business in that way. If the Colonial planter is to be let off a portion of the tax on the ground that he has invested a portion of his income every year, that should apply all round or it would be Colonial Preference with a vengeance. The hon. Member for St. Pancras (Mr. Cassel) has referred to the position of insurance offices, and I should like to say a word upon that. There has for many years been a distinct grievance on the part of insurance offices. They have felt that they have been unjustly taxed, and that has applied to the life offices, as compared with offices with composite stock in particular. If you take the amount at which a life office is taxed at the present moment and the amount at which a fire office is taxed, and if you then take the amount at which these two offices, if combined in one, would be taxed on precisely the same income you find that under the present law the taxation of the two offices combined would be very much less than the taxation of the two offices separately. Obviously that is an inequality and an injustice to those offices which are not so combined, and it is an inequality which I believe the Chancellor of the Exchequer really recognises.

There is also another point upon which Mutual offices feel that they have a grievance. My point is that this grievance is going to be very much accentuated by the operation of this Clause. A very large proportion, indeed, of the people insured in life insurance offices—I am not now referring to industrial offices, but ordinary life insurance offices—are very small people. The average policy issued by the insurance offices of this country is only £350—it is not an industrial policy—and that represents the small men. In the office with which I am personally connected one-third of our policies are not more than £150. In almost every case that represents a man who has an income which is smaller than would be liable to Income Tax, namely, the insurance of a man with less than £160 a year. The £150 men are men who would not be liable to Income Tax, and a great many of the others would only be liable to Income Tax at a reduced rate. These are their investments, their accumulations, their savings, and under the present Budget they would be charged at the rate of 1s. 3d. These men would not be liable for the tax if they had invested their money in an ordinary company from which they received dividends, because they could recover it. They are liable to the tax because their investment is in an insurance policy. The third grievance is that life insurance offices are not allowed to deduct their expenses from their income from interest. They incur costs in working their organisation, in managing their business, and in getting their interest, but they are not allowed to deduct their expenses. These are three definite grievances which are being strongly felt. They have been frequently put before the Chancellor of the Exchequer, but we have not felt so strongly about them as we might because we have been able to avoid a good deal of Income Tax by collecting the income on our Colonial and foreign investments out of this, and not bringing it here, and that has to some extent rectified the balance of the other grievances. But the fact that now, under this Clause, we are to be taxed upon all this money collected abroad, does make us feel more keenly and strongly than ever the other grievances under which we are suffering. In my judgment this extra taxation under this Clause ought not to be levied until the other grievances have been rectified.

If, as I believe is the ease, the Chancellor of the Exchequer does not feel himself able to rectify this year those other grievances, which I also believe he largely recognises, he ought not to accentuate them by proceeding with this particular Clause. It is a very difficult Clause, it is a new one, and it is not estimated that he will receive a great deal from it. It would be well if he would consider the whole question of Income Tax together. There is one point upon which I am very glad to see that the Chancellor of the Exchequer has starred an Amendment which I have put down. That is with regard to income which has been collected abroad. It has been the custom for some years past for most of the insurance companies and other investing companies to collect a considerable amount of their income abroad. One condition of their being able to avoid the tax upon it was that they must reinvest it abroad. The moment they brought it here in the form of cash it became liable to Income Tax. The result was that they did not bring it here but kept it yonder and reinvested it there. Undoubtedly that is a disadvantage to this country. It is a disadvantage to the London investing market, because in order to avoid the tax the money must be reinvested abroad, therefore it does not come here, it is not invested here, and, naturally, it is invested in securities which can be collected abroad. Therefore it is money practically kept away from this country to the disadvantage of our home securities and of the financial people in the City of London. The tax is to be levied in future upon this income. The Amendment which I have put down makes clear what I understand the intention of the Government, namely, that the accumulated income which has been collected abroad—that is, the past income—may now be brought home without being liable to the tax, but that all future income for this year and in future collected abroad, will be liable to the tax. That will enable offices and investors to bring home that money which otherwise they never will bring home, and allow the income from it to be invested in this country to the advantage of everybody. I am very glad indeed to see that the Chancellor of the Exchequer has starred that Amendment. I should be glad if he could see his way either to rectify the other injustices and inequalities which I have mentioned, or to defer, for the moment, the putting on of this new tax.


I confess I am rather disappointed that the right hon. Gentleman (Sir T. Whittaker), who has great business, experience, has not thought fit to deal with the wider objections to this Clause. For instance, he said nothing whatever about the question of double taxation, which is really a serious one, and which, if the Clause is carried, is likely to cause very great injustice to persons who have property abroad. If the property, say land, is in a Colony or abroad, the income from it is taxed by the Government of the Colony or of the foreign country where the property is. They are perfectly entitled to tax it, because it is that Government which protects the property, which carries, on the daily functions of government in that country and is therefore entitled to levy upon the income earned there a proper tax for the purposes of government. But it is not right that when the income is taxed there it should be taxed again over here. To begin with, that is contrary, as my hon. and learned Friend the Member for West St. Pancras (Mr. Cassel) said, to the comity which prevails among the different countries with regard to the income derived from immovable property situated in those countries. Secondly, we are, by taxing the income again, diminishing the fund which is to be spent in the places where the income is earned. It will certainly be a great hardship to the individual who is taxed, who suffers by paying a double tax for receiving his income in a Colony.

The least that should be done in that respect is to adopt the Amendment mentioned by my hon. and learned Friend, and to follow the precedent of Section 20 of the Act of 1894, and say, that if you tax foreign incomes or Colonial incomes here, you shall at least enable the taxpayer to deduct from the Income Tax payable here the amount of the tax on the income which he has paid in the Colony. That, surely, is the very least which in the interests of fairness you ought to do in that respect. Then may I ask another question which puzzles me: Why is it that you are going to tax income from stocks and securities abroad and in the Colonies belonging to a person domiciled in this country, but you are not going to tax the profits of a Colonial or foreign business received by a person domiciled here? What is the distinction, as a matter of fairness, between the case of a man who has a business abroad, or a share in a foreign business, and receives there a very large income from it, and who has to pay no tax under this Clause, and the other case of a man who has shares, say, in a commercial company situated abroad or in the Colonies, who, because he gets his income in the shape of dividends on shares and securities, is to pay income in this country under this Clause? There must be some reason behind the distinction, but at present it seems to me a very unfair one, and one which presses very hardly on a particular class of taxpayer, and lets off the possibly wealthier taxpayer who derives his income from a foreign business.

Let me put another point. Surely the effect of this Clause will be to drive business more and more from this country. I am surprised that the right hon. Gentleman (Sir T. Whittaker) has not mentioned that point, which I am sure must appeal to him and all other business men. There is not only the case of the man who comes back in order to have his children educated here, and so on, but who has his investments abroad upon which he depends for his future. That person is to be taxed twice over. But apart from him there is the question of the effect on business in this country. Supposing a great business firm had to choose between making its headquarters, that is its domicile, abroad or here. Surely that firm will be influenced by the consideration that if it makes its headquarters here it will pay double tax on its foreign profits, while if it makes its headquarters abroad it will escape that double tax. The effect may be to drive these great businesses away, which by the Patents Act you are trying to bring home, and to impose a penalty upon people who otherwise would be, and are, prepared to carry on these businesses in this country. That is a thing which ought to be considered. Quite apart from any fiscal argument whatever, it seems to me to be a very unwise step. But if that applies to firms, it applies with equal force, and perhaps with greater force, to companies and corporations. The instance which has been given of insurance companies is only an instance of a wider class, and the consideration applies with especial force, I agree, to these companies, but it applies to all businesses. A big business corporation has often to choose between making its headquarters and registering its company in London, or in Paris, or in New York, and I know from my own experience that when that question arises the question of taxation is always raised in connection with it. If a great insurance company or a great corporation, considering whether it should carry on its great operations from London or from Paris, is faced with this Clause, should it become a Section of an Act, and is told, "If you carry on your business in New York you will pay Income Tax under the law of the United States and that is all, but if you make your headquarters in London you will pay in New York upon the income earned there, and you will pay in London upon income earned both in London and in New York," that is a tremendous handicap. We all know that there is great competition between foreign and Colonial insurance companies and British companies. They compete here, and they compete in foreign countries. You are going to handicap them in both spheres, and you are going to do a real injury, I believe, to the insurance business and to all businesses of that kind which are becoming more and more great corporations able to shift their domicile when they think fit, and are very likely to be influenced in that matter. I do not think that can have been fully considered. I hope it will be, because it is not a mere Parliamentary criticism; it is a real objection to this Clause.

I do not quite follow the meaning of the Amendment which has been put down by the right hon. Gentleman (Sir T. Whittaker) and the Chancellor of the Exchequer. Does it mean, as it appears to do, that you are going to tax these persons and companies upon their gross income earned abroad? If it is not so, words ought to be inserted to make it clear. An insurance company has to pay its claims over here. For that purpose it relies—first, upon its premium income, and secondly, upon its investments, some of which may be Colonial, but its real profit is the amount of its receipts after deducting its liabilities, and if you are going to tax that business upon its gross receipts from foreign or Colonial investments you are going to impose a very heavy charge upon it indeed, and by so doing you must increase the amount of premium income to be levied upon its policy holders and, of course, increase the burden of insurance, which we should all like to make lighter. I want to press, first, that this change is a very serious change, and may have far-reaching effect and should not be carried in a hurry. This Clause has not been fully considered and its effects have not been fully understood, and I think the right thing would be, without negativing it, to withdraw it for this year, or for this Session, if you please, and give it further consideration before this change is made. In any case, I think the proviso my hon. Friend has put down for the purpose of preventing the double payment of tax ought to be accepted.


In putting down this Clause the Chancellor of the Exchequer had in view a laudable object, and that was to attempt to collect income Tax from those who deliberately, by investing abroad, endeavoured to evade it. But in endeavouring to accomplish that there is always the risk, and I think the risk has been run if it is not removed by the Amendment, of striking at a great many other people who are conducting a legitimate business and who have to leave moneys abroad for the purpose of carrying on their business. That is really one of the great difficulties of the Clause. I am rather surprised at the hon. and learned Gentleman (Mr. Cave) not seeing any difference between a man who invests, we will say, some money in Central Railway shares in New York in order to escape Income Tax and a man who is carrying on a business for the benefit of British trade abroad and who is using the profits earned in that business for the extension of that British business abroad.


I did not say I saw no difference.


I understood the hon. and learned Gentleman to say he did not understand the difference of treatment of a firm as compared with a company. There are various differences. First of all a man can invest in a company abroad without ever going abroad himself and bearing the burden and heat of the day in some foreign clime, in promoting not only his own interest but the interest of others in the foreign country. There is a distinct difference in the law as regards the income from these investments. Take the case of the Egyptian Hotel, where a company carrying on business in Egypt had, I think, an English board and Egyptian shareholders. That company was not found in the Courts liable to pay Income Tax on profits because it was managed in Egypt, and it was only obliged to pay on what was remitted to this country. The position of a British firm with a head office in London, and branches scattered in various places over the world, is this. If the head partners in London retain some ultimate control over the branches abroad, they have been held to be controlling the business from London, and to be liable to pay taxes on income. That is the difference between the position of a company and a firm. It is very much against the firm, and I think the effect of having preferential treatment would fall upon those who go abroad to promote British trade and not merely on those who stay at home and invest their money in foreign shares.

There is one thing I should urge on the Chancellor of the Exchequer and that is that he should not accept the Amendment making a discrimination between foreign countries and British Colonies. If that were done, it would be very unfair to the investor of money in, say, the Argentine, as compared with the investor of money in Canada. To make a difference of this sort would, it appears to me, be invidious, and what is perhaps a more serious consideration, it would invite retaliation. Supposing we made a difference between money invested in the Colonies and in the Argentine and other foreign countries, this fact would be brought up in the Congresses of those countries, and when it came to the taxing of railways and other enterprises in those countries in which British capital is invested, the fact that we had made a discrimination would be borne in mind, and evil results would follow. I would ask the Chancellor of the Exchequer to bear in mind one point in connection with this Clause. He speaks of income arising from securities, and we are dealing rather broadly with the Clause at the moment. I wish to bring to his mind that there are certain British firms and companies and individuals who have investments and enterprises abroad, and who borrow money from the Banks in those countries for the purpose of promoting and carrying on their businesses. The view of the Inland Revenue at present is that if a company in California borrows money from the Bank of California, it has to pay Income Tax not only on the profits that the company makes, but also on the money it borrowed, and the interest it paid to the Bank in California. That appears to me to be an unjust state of matters. The theory is that we are not really taxing profits but taxing income; that it is the gross income we are taxing, and that, therefore, while we are allowed to deduct the interest we pay to the British Bank, and we are not allowed to deduct the interest we pay to the foreign bank. An anomaly still greater is that if you raise money by discounting bills, you are allowed to make a deduction in respect of the interest paid to the foreign bank. In estimating the income arising from securities, I hope the right hon. Gentleman will bear in mind that that income does include a good deal of interest which has to be paid to foreign banks. It would be a very great hardship to tax them also upon interest which is really a charge upon their businesses.

Sir J. D. REES

I wish to say a word or two about the effect of this tax upon India. The matter has been fully dealt with by my hon. Friends on particular points, but somehow India has escaped notice. I think the whole principle is a bad one, but I am content to deal with the particular case of India, and more particularly from the point of view of Indian finance in general, and of the hardships to the payer of Income Tax. I think everyone knows how difficult it is to get capital into India for investments. It is difficult to get rupee and sterling capital put into railways in that country where the extent of the lines is small in proportion to what is required for carrying on the vast trade of the country. I would mention, by way of illustration, the difficulty of getting money for equipping the existing lines. Even for that there is not enough, and this proposal is going to have the effect of discouraging people who have capital to invest and deterring them from putting their money in Indian enterprises. The people of India are addicted to hoarding their money. They will not put it into industrial concerns in the country. It is the merchant who leaves his money there to be reinvested who is going to be penalised by this most unfortunate proposal. The tea, jute, cotton, and other industries of India have been created and financed by British investors, who are now going to be hit by this provision. Their habit is to leave in the country a large amount of liquid capital, which is employed in financing their businesses, and it is most desirable in the interest of the British Empire as a whole that they should continue to do that. Profits and dividends not remitted to this country or spent in India should be considered as part of Indian capital, and should be left to fructify there and improve the general trade of the country. The return upon these investments is extremely moderate. Government rupee paper of 3½ per cent. is at 4 discount, and sterling paper at 3½ per cent, stands no higher than 10 discount. Even under the existing law capital does not flow readily into India. It has to be coaxed into the country. One would have thought that no proposal would come before Parliament to impede capital from flowing to that country. Speaking on behalf of India, I say that this proposal is altogether indefensible. It is a hardship to merchants, and a damage to the trade of the country. There is also the question which was put to the right hon. Gentleman by the hon. Member for St. Pancras. Take the case of Indian officials who invest some of their savings in India. Public servants at present are paying in India an Income Tax of about 2½ per cent, to the Indian Government. Under this provision of this Bill they would be paying a tax of four times as much to the Government which does nothing whatever for them. India is a separate financial unit, which has a separate Budget of its own. Why are these people to be hit twice over, and to be taxed so much more heavily by the Government which does not protect them than by the Government which does? I need not dwell upon the great hardship which this causes to small Indian officials, and which will absolutely keep them out of this country, but I may read one letter from many which I have received. This was written by a retired Indian servant. He says:— I have five children living with me. The hoys have to he maintained and educated"— he is now living in England— practically until they are twenty-one. The Government at present mulets me in a sum which would at least clothe one of the children. I have written direct to the Chancellor of the Exchequer, but, of course, I have got no reply. It is quite easy to multiply cases like that. Those are typical cases, and feelings of compassion, which are displayed so liberally to people at the utmost ends of the earth, should be extended to fellow countrymen who are being oppressed so grievously by this new provision of the law. It is not fair that capital of the class which I describe should be taxed in this country. The Income Tax in India should be what the Income Tax in this country should be, but what under the right hon. Gentleman it has ceased to be, a war tax—something available when a levy is required for some sudden military or naval or other emergency. In this case that reserve must be sensibly diminished when the same capital is subject to Income Tax in this country as well as in India. Another effect of this tax will be to prejudice Indian loans. A rupee loan was issued recently at the very excellent rate of 95½ per cent., but I fear that in future, owing to the menace of this new taxation, we shall not see a similar success attending an Indian loan. I am only anxious for the moment to deal with the particularly injurious effect which this tax has upon this particular community. It must have the effect of causing many capitalists to renounce their nationality, to cease to maintain establishments in this country, to live in hotels, and to lessen their liability to general taxation in this country. The question of this double taxation was raised at the last Imperial Conference. The Government of New Zealand moved a Resolution that it was inequitable that persons resident in the United Kingdom, who, under the laws of a self-governing Dependency, pay Income or other tax to the Government of such Dependency in respect of income or profit in that Dependency derived, should have to pay a further tax in respect of the same income or profits in the United Kingdom. A similar resolution was moved by the Government of the Union of South Africa, and I observe that at that time the present Chancellor of the Exchequer expressed an opinion which seemed to be to some extent sympathetic with those resolutions, and he is now the author of this Clause, which runs entirely counter to the spirit and, indeed, the letter of what he then said. India is more hit by this Clause than the Colonies. The Colonies are not in leading strings. They can retaliate, so to speak, against the British Government, in a matter like this. They are independent in regard to their taxation, whereas India, although financially an independent unit, is not entirely independent, and could not retaliate in respect of this tax in the same way as the Colonies can. It will be allowed, I think, by Parliament, that taxation of this character is unfair, because the principle has been conceded as regards Death Duties. Death Duties payable to the Government of India in respect of Indian assets should be deducted or allowed in assessing Death Duties payable on an estate when a deceased person leaves assets in India. I do not know why that is not provided now. At the very least, there should be a rebate equal to the Income Tax levied by the Indian Government. I would not accept that as sufficient, neither would those for whom I speak, but that is the very minimum of justice which might be done in respect of the claims which I am endeavouring to put forth. As this Clause is worded it would embrace profits or gains received in or through any Indian dividends or shares, held by a partner in a trade or business, when it was converted into a private limited liability company. I think that the Chancellor of the Exchequer must have overlooked this the other day when he answered a question put by the hon. Member for Wirrall.

As to the drafting of the Clause I would like to express a doubt as to whether the expression "securities" might not be stretched to cover interest on the capital to which I have referred. I do not know what exactly would be covered by the word "securities" in that Clause, and I should be glad if the Solicitor-General, whom I see present, will give this matter his attention. On the general question of Indian taxation it is at a time when the neighbouring Empire of Japan which enjoys the coasting trade of India, while Indian and British-Indian ships are excluded from it, while they are piling up subsidies to fight British trade, that the British Government comes in and levies a double Income Tax from these unfortunate men. When the Americans are starting an Income Tax they have made it chargeable only on citizens of the United States, nonresidents being expressly exempt from its payment. I do not know why that principle is not good in this country. The American capitalist who remains a citizen of the United States and spends part of the year in this country, should be subject to the same treatment here as that which is given to capitalists in America under the new Income Tax Law. No one else has pointed out in the Debate how very heavily this new provision will fall upon India in general in the way of prejudicing the in flow of capital, which is so necessary, and the absence of which is deplored on all sides, and particularly how oppressive it is as regards the small man. The big man will be able to escape this net. If a man is a capitalist of the class who has agents in different parts of the Continent or the East, it is not difficult for him so to arrange as not to receive his income in this country, or at any rate to conceal its existence, whereas the small man is absolutely at the mercy of the tax gatherer. No man is poorer than the small Indian official like the gentleman from whose letter I read an extract who comes home, after spending thirty years in India, with a pension of about £300 a year, and who has a family to maintain. The man who has been able to carry along on an income perhaps double the amount, comes home tired out after his long service, perhaps having a family of five children—in some cases a greater number of children—and suddenly he finds himself confronted, on a smaller income, with this new demand. I know that the Chancellor of the Exchequer has no regard whatever for the Income Tax payer. He looks upon him as a natural foe to be plundered on all occasions. But I appeal to the Committee to do justice to this class of Income Tax payers, who, I presume, are believed to vote against the Government as being their natural enemies. I do not know how this is, but I should think that the way in which the Income Tax is piled up—


These are general observations.

Sir J. D. REES

I was referring particularly to this Clause and its effect upon the Income Tax payers to whom I refer, and I sincerely hope that they will receive adequate attention from the Government.

9.0 P.M.


I wish to draw attention to several general considerations regarding the effect of this Clause upon the trade of our Colonies and upon our own trade. We have not heard any ex- planation of the Clause, or any comment upon it, or whether there is likely to be any, on the part of the Government. This is a matter which I think ought to be very carefully considered before we enact a Clause of this kind. The first point to which I wish to draw attention is that the essential feature of this Clause is to tax property outside our jurisdiction, and in the jurisdiction of another country. That is really a somewhat delicate proceeding, and I am afraid that in course of time, if not immediately, it will cause very considerable ill will between different countries and us, and between our Colonies and us, for the reason that we have made in the Colonies investments which are necessarily developing those Colonies. And, further, the Colonies are more developed by British capital than by the capital of any other country. If we tax property in those Colonies we diminish in the first place their resources, and, in the second place, we discourage investments in those Colonies and tend to confine investments to the Mother Country. Some people think that is a proper course, and the Chinese think it a good thing to keep all business in their own country. We who are a great trading community, we who have wide-world trade, must regard as serious restriction of investments in foreign countries. Let us see what the process is. Let us take a country like the Argentine, where we have, I suppose, £300,000,000 or £400,000,000 invested. As a result of those investments we have to provide engines, rolling stock, and goods of every kind of manufacture in this country, employment being thus provided for working men here, besides which there is freight to and from for our ships. We are now receiving in return large quantities of meat, grain, live-stock, maize, and other food products which have really become essential to the feeding of the people of this country.

Foreign investments of this kind ought to go on. If we put a limit upon our food importations, or restrict the free flow of money for these purposes, it will tend to increase the cost of living, and will ultimately restrict the number of people who can find a subsistence in this country. I hope we are to have some explanation or some assurance on the part of the Government that some such effect as I have described will not be created by the present Clause. Then, again, with regard to those gentlemen who are not ordinarily resident within the jurisdiction, who come here, but do not permanently reside here, if these restrictions are imposed, it will result in the traders of the Colonies having a considerable preference over our own merchants in this country. The change made by the Amendment of the Chancellor of the Exchequer will tend rather to increase the competition which our merchants here will feel than to satisfy any misgivings that may have been felt. No doubt those who are resident in the Colonies, and who come to this country, but are not ordinarily domiciled here, if you build up this Chinese wall, will deal with their own merchants in the Colonies, and our trade will dwindle. I hope that this will be considered by the Government. I think it would be wiser, seeing that they will get very little money from this proposal, to do as the Prime Minister has suggested, namely, to send the Clause to be considered by a Committee, and it should be deferred until we have had a report from that Committee. We would then have more certainty in the matter.


I think that the Committee has had some right to complain of the action of the Government. Here we have a very novel, a most complicated, and extremely important proposal. We have just had a very interesting speech from the hon. Member who has just spoken, and who has dealt with it, not as a party subject at all, but as a business subject. It is not a party matter. To any sensible person it is perfectly clear—indeed, it is admitted that the object of this Clause is to catch people who, by putting their money out of the jurisdiction, are endeavouring to evade the taxes imposed by this House. Everybody has agreed on both sides of the House that that is the desirable object if you can fulfil it. As a business Assembly—and we purport to be a business Assembly—we have here a proposal by the Chancellor of the Exchequer which is considered likely to fulfil that object. What further effect is it likely to have? We have had an important speech from the hon. Member who has business knowledge, and during that speech one Member of the Government was present. I am inclined to move to report Progress, but under the guillotine I am prevented from doing so. Surely the Government are in honour bound on an occasion like this, when they have prevented us from taking normal means to give some attention to important matters. We find our- selves now, after two hours' Debate, without a single word from the Government Bench as to a most difficult and complicated Clause, as to which Members on both sides have been giving opinions as to its meaning. When the Chairman intimated there might be a general discussion, everybody assumed that after the Mover and the hon. Member for St. Pancras, we would have had an authoritative explanation either from the Chancellor of the Exchequer or the Attorney-General as to the real meaning of the Clause, but not one word.

We are still absolutely in the dark as to a Clause, the drafting of which must necessarily be obscure. Hon. Members have asked what is its meaning but we do not know what it means, and we are arguing in the dark. Really I am moved to most serious indignation at what is a scandal. Here we are supposed to cover in four hours an immense amount of ground which everybody knows could not be covered in the time, and two hours wasted in discussing proposals which have never been explained. It is perfectly scandalous, and I hope the country will take note of the contempt with which the Government treat the House of Commons. In this we may be involved in most serious complications with our own Colonies. As the hon. Member (Mr. Molteno) has pointed out, we are now providing a distinct difference in the treatment of the Colonial and of the foreigner. The foreigner simply escapes the new double taxes, and the Colonial only escapes so long as he is to be or can be properly considered as still resident in his Colony. Thus an American subject who remains so and mainly resides here escapes, but the Colonial who does so, and who too has made his fortune abroad, is to be liable simply because he is a Colonial. That must cause very great discontent within the Empire. That is the position in which we find ourselves through the Chancellor of the Exchequer in his perpetual attempt to pile the whole of the taxation on to as few as possible and to persuade the rest of the country that he is doing no harm. We have had Chancellors on both sides, and most strongly the late Sir William Harcourt, pointing out that the effect of raising taxation of any kind, direct or indirect, beyond a certain limit is always to cause evasion or avoidance. It must be so. In pursuit of the avoider you are entering very deep and dangerous water. In the absence of any explanation as to this Clause I do not feel inclined and I do not intend to discuss it, but we see certain probable effects. We cannot be expected to discuss it until we have had an explanation from the Government. As I say, we are entering in this Clause upon deep water and we do not know where we are or what we may be doing. For this House in the absence of any explanation to carry a Clause like this, with all its consequences, is simply part of the thoughtless, inconsiderate and reckless finance of anything to meet the exigencies of the moment and pile the taxes on to a section of the people, and then when a mistake is made impose the tax in some other direction and never mind what happens or future consequences, about which nobody seems to think or care. I am glad to see that the Attorney-General has returned, and I repeat that I think it is hardly right that Ave should have had two and a quarter hours' discussion without any statement of any kind from the Front Bench, and I hope the right hon. Gentleman will tell us what this Clause really means and intends.


We have had very little time to discuss these Clauses, and this new Clause will have the most serious consequences right throughout the British Empire. We have had criticism directed at this Clause from both sides and I hope the Government will consider its operation and do their best in order to alter it to the advantage of those who will suffer grievances under it. There is not the slightest doubt that there are real grievances under this Clause. Like other hon. Members, I am not at all certain that those who invest their surplus income abroad and allow it to accumulate will be gathered by the Chancellor into his net. I think he will find them rather evasive people, though I, for one, would have no sympathy with them. But I am interested and I do speak for the British subject who, according to the view of the Commissioner of Inland Revenue, is ordinarily resident in this country either for a long or short time. Before this Bill was ever printed those British subjects suffered under distinct grievances and great hardships, and it is now proposed to accentuate and aggravate those hardships to an extent which I do not think is appreciated by hon. Members in this House. This Clause opens up a large and by no means a party question, but a great Imperial question.

To extend this to all investment made in our Colonies is a proposition full of danger, and in my opinion will endanger the fidelity of our Colonies to a very large extent. I think the right hon. Gentleman must have had representations made to him by the Colonial Secretary, who has had representations made to him by the representatives of the Colonies in this country. I venture to say there is not one of those representatives who does not view with the greatest alarm the possible consequences of this Clause. The impolicy of the proposal is affecting those who are fighting our commercial battles overseas, and that is a matter which cannot be overlooked by the Government at the present time. No one knows exactly the position in which he stands. The phraseology of the Clause, which has not been explained by the Government, is certainly ambiguous. It is feared by Colonials that the Chancellor of the Exchequer contemplates the taxation of the profits of businesses in the Colonies which have a branch office in this country. The right hon. Gentleman has been approached on the subject by representatives of the Colonies, and I believe he stated—I hope that this will be confirmed—that no change is to take place in the provisions of the law in regard to liability in respect of profits derived from businesses carried on abroad. If that is the case, it is satisfactory to a certain extent. But it does not in any way help those Colonists who are now resident in this country, whose money is remitted to them from the Colonies, and who are liable to higher rates of Income Tax in addition to the taxation which they have to pay in their own country. I will take one or two typical cases to show the hardship under which these Colonists suffer, and in order that the Committee may realise the extent of the taxation which they have to bear now. Take a case connected with the pastoral industry of Australia. It will be generally recognised that that is the most important industry in Australia. It is the stable industry, the industry which has made the prosperity of the Commonwealth, and it is on the prosperity of that industry that the whole future of the Commonwealth depends.

Take the case of an owner of pastoral property in Australia who, after leaving these shores perhaps twenty or thirty yeas ago, comes over to spend the rest of his life in England. He has been fortunate enough to have acquired property which is now worth some hundred thousand pounds, on which he gets an average return of 5 per cent. How is that man treated under this particular Clause when he comes over here? I will give the actual taxation which he pays in the Commonwealth and what he has to pay here. He pays over there a Federal Land Tax. Hon Members opposite may approve of that. It is not my duty to-night to say whether Australian land taxation is good or not. He pays a Federal Land Tax, amounting to £1,149 6s. 1d. on that £5,000 a year. He has to pay a State Income Tax of a shilling. That brings his taxation up to nearly £1,400. He then has to pay another £250 Income Tax and Super-tax here. That makes a total taxation of £l,650 on that income of £5,000, without counting any local taxation that he may have to pay. If he derives the whole of the £5,000 from property in Australia, he has to pay, in New South Wales for instance, a threepenny Property Tax. He will therefore pay over there an Income Tax of a shilling and a Property Tax of threepence, and then over here an Income Tax of 1s. 4d. and a Super-tax, making a total of £700 a year. I think the Government will realise that these are particularly hard cases. I could cite many others in which there is a real grievance, the existence of which must imperil the good commercial relations which at present exist between us and our possessions. There are only two alternatives open to the individuals affected in such cases. One is that they should take their capital away from the Colonies, which would be bad for the development of the Colonies. The other is that they should not become resident in this country, which would be bad for the Chancellor of the Exchequer, because they at any rate pay Income Tax on a certain portion of their income in this country. I would like to emphasise the point put by my hon. Friend, that you are letting off the man who is not a naturalised British subject. He can come here and enjoy all the advantages which Great Britain offers, and you let him off from this taxation, but you penalise almost to the extent of confiscation the man who has given the best years of his life to building up your Empire.


The last speaker has perhaps not observed that there are on the Paper in the name of the Chancellor of the Exchequer two Amendments, which will slightly vary the effect of this Clause. It would be convenient if I offered to the Committee as clear a statement as I can of what is intended to be the scope of this Clause as I understand it. Let me first say that the Debate presents this rather curious feature. The Mover and Seconder explained that the Amendment was put forward by them because they warmly sympathised with the object of the Clause, and they were only concerned lest the method suggested should not be effective for its purpose. Nobody who heard only the later speeches in the Debate would imagine that that was the view of the Opposition. The hon. and learned Member for Kingston (Mr. Cave) took the view that the Clause would necessarily involve in most cases an unfair system of taxation, which he called double taxation, that it would drive capital out of the country, and all the rest of it. It does not appear that the criticism of the Clause is quite consistent. I am not clear now whether the view of hon. Gentlemen opposite is that the object of the Clause is a good one, but that the methods we propose are clumsy, or whether their view is that it is a bad proposal from first to last. [HON. MEMBERS: "Hear, hear!"] I thought that probably the revised version would be preferred to that put forward by the sponsors of the Amendment. I should have thought that, assuming you could do it with reasonable effectiveness—which I agree is a proper condition to lay down—there was no sort of income which, if you have an Income Tax at all, ought more obviously to be taxed than an income which comes from investments abroad and an income which is kept abroad. It is not merely income in the same sense as all other incomes, but the man who is entitled to it is in such a position that he does not need to spend it on his own wants in his own country. If there was any sort of income which it would be fair, if possible, to bring within the net of the Income Tax law, I should have thought it was an income of that sort which its owner does not even need to spend.

I quite agree—it is a perfectly fair criticism to raise—that the question will then arise, Can you do it with sufficient certainty to avoid very unfair and undesirable consequences? I concede that that criticism is one well worth weighing. For instance, if it were true that we had to rely on nothing except the good faith and the honesty of the Income Tax payer, I think it would be a very fair criticism to make that this Clause is one which is really letting off insincerity at the expense of honesty. That is quite a fair criticism to make; but is it sol? We in this Clause have, of course, brought in the machinery and penalties of the ordinary Income Tax law. I doubt whether that machinery and those penalties always make certain even under our present law that income that ought to be taxed is brought under the review of the Income Tax authorities. Probably not! Well, this is something very much more effective than relying upon the good will of certain benevolent and patriotic persons who are prepared to volunteer to pay their taxes when nobody can make them. In the first place, you have the provision—which is familiar enough in our Income Tax law—that any man who makes a false declaration thereby exposes himself to a substantial penalty, and to three times the tax; and in the second place—and I mention this because I think the hon. Member who moved the Amendment referred to it—there is a further opportunity of correcting an inadequate statement when the taxpayer dies. I think the hon. Member who, in his speech talks about getting level with the defaulting person, did not observe that.

The answer to his criticism, I think, is this—and, again, this is one of the general provisions of our Income Tax law—although you cannot exact penalties from the executors, and cannot send executors to prison, because of what the dead man, whom they represent, may have done, still you can exact—as you do exact—from the estate of the dead man when it comes under review at the time of the Death Duties, and the like stages, three years' Income Tax if it is found that it has been improperly returned. I say we are not here putting forward this new provision with the idea that we have simply to rely upon the goodwill and benevolence of the Income Tax payer to tell us. That, indeed, would be a broken reed upon which to rely. We have got the whole machinery of the Income Tax law which is available to be put in motion in this regard. Even so, it is quite true that there are obviously greater difficulties in dealing with income of this sort which does not come to this country than would be the case with income which is already within the purview of the authorities. That is quite true. I can say quite frankly, if the true criticism was that we have not got a reasonable and effective machine to secure that the just and the unjust both come under the same dispensation, it would be a very forcible criticism. Is that so?

I submit to the Committee this: It has been said, "Why do you not wait until after the Committee or Commission which has been suggested on the Income Tax law have sat and reported?" I do not think we ought to wait. In the first place, if this is a case which ought to be covered by the Income Tax law we had much better begin by bringing it within that just law now, though it may very well be that experience will go to show that our machinery can be improved and tightened here and there. In the second place, this Committee which the Prime Minister has spoken of ought to be a very valuable body, and its recomendation will be much better worth attention if they are able to speak in the light, even of the briefest experience of the imposition of this tax. Let me give an illustration in connection with the ordinary Income Tax law. There are the Statutes of 1842 and 1853. Everyone whose business it is to learn about these knows that the Statute of 1853 was very largely concerned with screwing up the machinery and tightening up the loose joints which experience had shown to exist under the dispensation of 1842. It had other objects, of course, such as extending the Income Tax to Ireland. But the Statute of 1853 would never have been the effective piece of machinery it is if it had not been that we started in 1842, and the machinery devised in the light of experience did something to make the Statute work more effectively.

I submit to the Committee these general, observations before I attempt an exposition of the Clause. I ask the Committee to assume that it is right that we should endeavour to bring this sort of income within the Income Tax law, and I ask the Committee to remember that we propose to use all the machinery of the Income Tax law, of declaration, of penalty, of treble duty, and the like, in order to make evildoers realise that they do evil at their peril! What is the substance of the Clause? What does it provide? As things are, if interest on money, dividends on shares, the produce of any possession in a foreign country, the proceeds of a security are remitted to this country, they are liable to tax. Hon Members will see that there is reference here to the fourth case in Section 100 of the Income Tax Act, 1842, under which the proceeds from securities remitted to this country are taxed gross. There is no question of their making any allowances whatever. They come to this country and are taxed just in the way in which ordinary interest is taxed, or ordinary dividends are taxed in this country, without any regard to the balance of profit or loss. The fifth case is the case of the remittance to this country of the proceeds of foreign possessions. In that case there are certain deductions and allowances made before you arrive at the sum which you are going to tax. For example, an instance which is very well known to lawyers who have to deal with this subject is the case of a man who had an interest in an Australian wool business, and who had remitted to this country from time to time the proceeds of that business, either in bales or cash. The Committee will see at once the reason for the first of the two Amendments to this Clause which the Chancellor of the Exchequer proposes. Under the existing law these sums are only taxed if they are remitted to this country. Supposing, for example, that a company has got possessions, investments, or securities abroad producing £5,000 a year. It may be that in one year they would not remit to this country any portion of the proceeds of the £5,000 which will lie outside this country; nothing will come under the tax. Next year these possessions or securities outside this country will produce another £5,000. Suppose that the owner of such securities or possessions remits then not only £5,000 of the second year, but the previous £5,000, making £10,000 in all to this country. As soon as he remits that to this country, then, although part of that is the proceeds of the previous year, and part of it the proceeds of the current year, the existing Income Tax law will get the whole of the £10,000.

It, therefore, comes to this, that under the existing law you may remit sooner or later, but whenever you do remit you will be taxed on the whole amount you do remit. The Committee will see that as this Clause stands in the Bill, there is this conceivable danger—I do not say it will have this effect, but we have thought it right to make certain by the Amendment which we propose. If you are going to say to the owner of these foreign possessions or securities, "We propose to tax you year by year on your income, whether you remit it to this country or not," then it will mean that he would have to pay on the £10,000 in the second year by the remittance of the proceeds of both years. That is what occurred to us, and since that of course is not intended—whatever are the vices of the Chancellor of the Exchequer, it is not intended to perpetrate that particular fault—we thought it right to put down this Amendment in order to make it quite clear. Hon. Members will find on the Paper the suggested addition by the Chancellor of the Exchequer in Clause 5. And the effect of these words is to make it abundantly clear that, although the old law will still continue and we shall be able to tax remittances in the ordinary way as when they come to this country, so far as the taxpayers are caught by the new Clause they may have to pay year by year even though the amounts are not remitted into this country, and so we propose to add these words:

"and in particular for the purpose of computing Income Tax in respect of securities, stocks, shares, or rents to which this Section applies, in pursuance of the rules under the fourth and fifth-cases in Section one hundred of the Income Tax Act of 1842, the income arising from the securities, stocks, shares, or rents shall be substituted for the sums, profit, or gain as the case requires, received therefrom in the United Kingdom."

I think hon. Members will see that the effect of that is to say that, inasmuch as we are now going to bring within the Income Tax law the income year by year, although the income is not remitted into this country, we must not be entitled to tax it over again when it is remitted. Before I come to the second change may I say one or two words in reference to another criticism. The hon. and learned Member for St. Pancras had something to say about rents, and the hon. and gallant Gentleman who spoke just now had a question to ask about securities. As regards rents, of course it is quite true—the hon. and learned Gentleman quoted the authority of Professor Dicey and Sir William Harcourt—that we here in the British Parliament do not endeavour to put a tax upon foreign land. I doubt whether that is due simply to international comity; it is due to a very much simpler thing—that is, that you do not endeavour to put a tax upon foreign land because you could not exact it. You cannot go to a foreign country and put in a bailiff. Really, if one gets away from what are merely technical distinctions, there is no resemblance between the proposals in this Clause that you should bring into account rents which really are only one form of profit from foreign ownership, and that you should tax the land itself. The hon. and learned Gentleman says that rents is a new word in Income Tax law. As a word it may be. But, supposing you have a land company, of which there are many, whose head is in the City of London, whose directors may be Members of this House, and that land company buys land in other parts of the world and makes a profit on its rents from buying and selling land, does anyone say that this company, sitting here in London, has not to deliver a profit and loss account in order to be taxed under Schedule D?


Not on rent.


The hon. and learned Gentleman will see, if he avoids what is purely a technical distinction, the substance of the thing exists now. The company obtains part of its profit by letting lands, which enters into the balance of its profit and loss, and it is, as a matter of fact, taxed under our existing system. I am, therefore, wholly unable to see the distinction between a land company which is at present liable to Income Tax if managed from this country, although it has invested in foreign land, and if it lets foreign land and what is aimed at by this Clause; or take a hotel company that does nothing but let rooms—


We want an explanation upon this, because the Attorney-General is arguing as if it was a question of profits derived from land. What we have in question is Income Tax in respect of income arising from land, it does not say profit it says income.


I do not intend to escape from that point; I will come to it. For the moment I was pointing out that in our view we are not departing from the international comity or the principles of Sir William Harcourt or Professor Dicey, because we are bringing in the word rents. The hon. and gallant Gentleman asks a fair question. He asks what is going to be profit in the calculation. I think he will find the answer is this. Line nine contains the words:—

"subject in the case of income not received in the United Kingdom to the same deductions and allowances as if it had been so received and to a deduction on account of any annual interest or any annuity or other annual payment payable out of the income to a person not resident in the United Kingdom."

The hon. and gallant Gentleman will see supposing we were dealing with what had been remitted to the United Kingdom it would be what is remitted to the United Kingdom after the expenses of repairs and management were deducted. What we are interested in is what is left, and the object and meaning of this Clause, I respectfully submit, is not that you take the gross rents which a man who happened to own a house or property in Winnipeg is entitled to receive and is paid, but that you deal with that subject in exactly the same way in which it would be dealt with supposing it were remitted here, and it is the net and not the gross amount that comes into the calculation.


I hope the Attorney-General will excuse me for interrupting him, but we want to understand this. There are deductions made here based upon the facts and customs obtaining in this country. Taxes and deductions abroad are on a totally different basis. Deductions in Winnipeg are quite different to here.


That does not alter the fact if you say they are to be treated, subject to the same deductions and allowances received here, which you are able to apply in the case of rent, and in effect receive exactly the same consideration. Most certainly that is the explanation and meaning of the Clause. Then the hon. and gallant Gentleman asked about security. He asked what is the meaning of the word "security?" The word "security" is the word used, as no doubt the hon. Gentleman knows in the Income Tax Act, it is to be found in this very fourth case in Section 100. The distinction which is drawn between securities and possessions is this—


I was arguing on the basis that I was under the impression that deductions were to be left as if the tax was levied in this country. If deductions are to be made when the sum is received it must open the door to other considerations.


Let me put this case to the hon. and gallant Gentleman. Just suppose he and I owned houses side by side in some place outside the United Kingdom. I have my rent remitted year by year—that is to say, it comes under the tax now. The tax is not on the gross rent but on the amount I receive. The amount I receive is the amount left after repairs and other expenses have been paid. Let me suppose that he, with his identically similar house, keeps his rent over there. He will not be taxed on a penny more than I am taxed now, but he will be entitled to say, "If my rent is remitted to me over here I shall have, first of all, to provide the expenses which fall upon the landowner, and I have only to account for the rest." That is what he would include in his return, and if it is possible to tax the rents when they are remitted to this country, why should they not pay on those rents, even though they are not remitted?


The right hon. Gentleman has missed my point. He has his house and he remits what portion of the rent he pleases over here. He then pays Income Tax on that, but what he remits here is entirely at his option, and it is not based upon any definite regulations over which this country has any control. We each have a rent of £50. Suppose the right hon. Gentleman chooses to remit £25 home, he has not to account for that which he chooses to remit, and I do not remit anything.


But you will now.


The point is, how can any definite tax be based upon the right hon. Gentleman's remittance, which is wholly optional.


I am assuming that the hon. and gallant Gentleman would have an honest agent there who would remit him every farthing except that which he could justify as having been spent upon the property. More particularly it will fall upon the taxpayer to make a fair and honest return. There is one other Amendment which we thought it right to make, and here again, I am sorry to say, that I think the hon. and gallant Gentleman has entirely misunderstood this Clause. Some hon. Members seem to think that the proviso at the end of Clause 5 was ingeniously devised to favour foreigners at the expense of the British people. Of course that is nonsense. The words at the end of the proviso do not say that everybody who is ordinarily resident in a British Possession shall be taxed. Even that provision does not go quite far enough in the interests of British subjects who come from Dominions beyond the sea. There are British subjects, Canadians and others, who are ordinarily resident in the United Kingdom, it may be in England or in Scotland, who none the less ought to be exempted though it cannot be said they are ordinarily resident in a British possession. Therefore, we have proposed a second Amendment in which, instead of saying that persons are to be exempted who are British subjects ordinarily resident in a British possession, we propose to say that the only persons who are to be included are persons who are domiciled in the United Kingdom, and of course persons who are British subjects. The effect of that is to get rid of some of the criticisms which have been made here, and though, of course, this is an experiment and everything new is an experiment, none the less we think it is one which we are well justified in trying. I remember on the Second Reading of this Bill the right hon. Gentleman the Member for East Worcestershire (Mr. Austen Chamberlain) said that he was quite certain that this was so potent a fiscal instrument that it was going to produce a good deal more revenue than the Chancellor of the Exchequer thought it was. Now, in the right hon. Gentleman's absence, other hon. Members say that it is so leaky that it will not hold water for five minutes. We think that our Clause with our Amendments in it is calculated to be effective. No doubt experience will show that there are improvements to be made, but we think it all the better that the Clause shall be put into working order before the Committee or Commission sit on the Income Tax law in order that the Committee may deal with it in the light of some little experience. We ask the Committee to pass it, in the belief that it hits a class of income which, above all other incomes, deserves to be hit.


I would like to know if interest which has been earned abroad and invested may now be remitted without being taxed, or will that form of income be taxed when it is remitted? I am referring to accumulated income invested as capital abroad. Will that come here free of taxation or will it be taxed on the whole lot?


We have by our Amendment made certain that having called upon a man to account for income as he earns it year by year—it does not matter what it is, for he may throw it into the sea or invest it as he pleases—we cannot call upon him to account for income remitted in a lump sum from time to time. Profits earned abroad, if remitted after three or four years, come under the tax for remitted incomes when they reach this country.


I am afraid I have not made my point clear. Take the case of insurance companies. Suppose they have accumulated funds amounting to £20,000 lent out there as fresh capital investments. From to-day or from the date of the Budget you are saying that all your income derived from investments there is to be taxed. Suppose the insurance companies say, "That is all right for the future, but are you going to tax the investment which we have received as interest and reinvested there, when we choose to bring it home and reinvest it in this country?"


There is not the slightest intention of letting anybody off from paying the Income Tax. Do not let my hon. Friend think that he can bring home any ill-gotten gains—


I have no ill-gotten gains.


All this is going to be taxed by our new process. If the income has already been invested there and is now brought home, as soon as it falls under Clause 5 it will be taxed as remitted.


The object of my Amendment was to provide that so much income as had accumulated prior to the 5th April last, before this provision came into force, when brought home was not to be taxed. The tax on income was to commence only this year and to go on in future, and the money which would otherwise be spent abroad and was accumulating prior to the 5th April last would, when brought here, not be taxed.


I think the learned Attorney-General has not touched this point, which is that income accumulated abroad has now become capital. I think it would be well if the right hon. and learned Gentleman would make the point clear that in cases of remittance here of such capital there would be no taxation.


I am sorry, but I did not appreciate the point. I did not realise that my hon. Friend was laying emphasis on the difference between capital and merely delayed income. I think he is right. We should not, as the result of this, legislation, because an insurance company now sends accumulations of income home on that account tax it. The object of our Clause was to make it perfectly clear that insurance companies in that respect are safe. It is a very complicated thing to explain, and I am very far from claiming to have put it clearly. A life insurance company, for example, may often have investments abroad, and indeed some foreign States—many of the States of the United States of America—insist on their having investments abroad. It is, I think, a very common practice in the case of both life and fire companies—I am sure that it is in the case of fire companies—to use the interest on their foreign investments to pay their foreign losses. You are by that means able to make the return on your foreign investments meet your foreign losses, or pay your foreign debts, or pay for your foreign fires, and to that extent the thing never crosses the Atlantic at all. It has, of course, been a very much disputed question whether insurance companies in those circumstances were obliged to bring into their profit and loss account the interest on their foreign investments. They have always said that they are like a barrister or a stockbroker, or anybody else. He undoubtedly has not got to bring into his profit and loss account the interest on his investments abroad as long as he does not bring them home. The distinction is this: If an insurance company, as part of the business of carrying on its affairs, must invest, then the investing of its money comes within its profit and loss account, and, indeed, if you do not bring into the account the interest on investments, some of the insurance companies in the world would be able to show that they were running permanently at a loss. Insurance companies could not pay their losses simply out of receipts from premiums. They pay their losses out of two things. One is the premiums they receive, and the other is the interest on the premiums which they have invested. It has been decided, as a matter of fact, quite recently in the House of Lords that an insurance company is obliged to include in its profit and loss account its investments whether at home or abroad; but, of course, that is quite a different thing from saying that people in general—barristers or stockbrokers, or private gentlemen—have got to account for their interest on their investments as long as they do not bring it home, and I cannot help thinking that the idea that insurance companies are particularly hit by our provision is really a mistake. The people who are hit are those who have hitherto escaped. The insurance companies have always had to bring in the interest on their investments.


Oh, no!


Certainty. Take a fire insurance office like the Liverpool, London, and Globe.


No, take a life office.


An ordinary fire insurance company, like the Liverpool, London, and Globe, have to bring into their accounts the interest on their investments as well as their receipts from premiums, and it is quite right that they should, because that is the way they carry on their business. That is a very different thing from taxing it on its remittances to this country. It is quite true that as regards a life company you have to make actuarial calculations, but it is also true that a life company, at any rate, if it is not a mutual company, has got to bring into its accounts in the ordinary way interest on its investments as well as other things. I think, therefore, that insurance companies will find that it is not they who suffer materially by this new Clause, and as long as it is clear to those who represent them that we do not seek to tax accumulations of capital sent to this country now—


The right hon. Gentleman uses the words "accumulations of capital." Would he mind using the

words "accumulations of capitalised income"?


I mean that, That is, obviously, the intention of our Clause.


Is it not the case that the Clause does not have that effect at all?

10.0 P.M.


I am sorry to say that I do not even now quite understand. It is not intended to tax any capital, but all capital, as I understand, is saved up income. All capital at some time or other was income, and I am anxious to know the date it is proposed to start. Am I right in supposing that this Clause is intended to tax income earned since 6th April this year, or is it income earned last year and brought into this country this year to be taxed? At what stage does accumulated income, in my right hon. Friend's idea, become capital? He has really not told us the date at which these foreign incomes turn into capital. I always supposed that last year's income was capital, and I want to know whether the income he wishes to tax is income earned since 6th April this year.


I really must apologise to the Committee, but this is a most ghastly thing to talk about. I will accept the description of the hon. Gentleman opposite. One ought to describe this as "accumulations of capitalised income." The joint effect of our Clause and Amendments is that they are not brought under the tax at all. The object is to start them with a clean sheet.

Question put, "That the words proposed to be left out, stand part of the Clause."

The Committee divided: Ayes, 268; Noes, 197.

Division No. 165.] AYES. [10.3 p.m.
Abraham, William (Dublin, Harbour) Beauchamp, Sir Edward Chancellor, Henry George
Acland, Francis Dyke Beck, Arthur Cecil Chappie, Dr. William Allen
Adamson, William Benn, W. W.(T. Hamlets, St. George) Clancy, John Joseph
Addison, Dr. Christopher Bethell, Sir J. H. Clough, William
Agnew, Sir George William Black, Arthur W. Clynes, John R.
Ainsworth, John Stirling Beland, John Pius Collins, G. P.(Greenock)
Allen, Arthur A.(Dumbartonshire) Booth, Frederick Handel Collins, Sir Stephen (Lambeth)
Allen, Rt. Hon. Charles P.(Stroud) Bowerman, Charles W. Compton-Rickett, Rt. Hon. Sir J.
Armitage, R. Boyle, Daniel (Mayo, North) Cornwall, Sir Edwin A.
Arnold, Sydney Brady, Patrick Joseph Cory, Sir Clifford John
Baker, Harold T.(Accrington) Brunner, John F. L. Crooks, William
Baker, Joseph Allen(Finsbury, E.) Buckmaster, Sir Stanley O. Crumley, Patrick
Balfour, Sir Robert (Lanark) Burn, Rt. Hon. John Cuilinan, John
Baring, Sir Godfrey (Barnstaple) Burt, Rt. Hon. Thomas Davies, David (Montgomery Co.)
Barlow, Sir John Emmott (Somerset) Buxton, Noel Davies, Ellis William (Eifion)
Barnes, George N. Byies, Sir William Pollard Davies, Timothy (Lincs., Louth)
Barran, Sir John N.(Hawick Burghs) Carr-Gomm, H. W. Davies, Sir W. Howell (Bristol, S.)
Barran, Rowland Hurst (Leeds, N.) Cawley, Sir Frederick (Prestwich) Dawes, James Arthur
Beale, Sir William Phipson Cawley, Harold T. (Lancs., Heywood) Delany, William
Denman, Hon. Richard Douglas Lambert, Rt. Hon. G. (Devon, S. Molton) Price, C. E.(Edinburgh, Central)
Dewar, Sir J. A. Lambert, Richard (Wilts, Cricklade) Price, Sir Robert J. (Norfolk, E.)
Dickinson, Rt. Hon. Willoughby H. Lardner, James C. R. Priestley, Sir Arthur (Grantham)
Dillon, John Law, Hugh, A.(Donegal, West) Priestley, Sir W. E. B. (Bradford, E.)
Doris, William Lawson, Sir W. (Cumb'rid, Cockerm'th) Primrose, Hon. Neil James
Duffy, William J. Leach, Charles Pringle, Wiliam M. R.
Duncan, C.(Barrow-in-Furness) Levy, Sir Maurice Radford, George Heynes
Duncan, Sir J. Hastings (Yorks, Otley) Lewis, Rt. Hon. John Herbert Rattan, Peter Wilson
Edwards, Sir Francis (Radnor) Low, Sir Frederick (Norwich) Rea, Walter Russell (Scarborough)
Edwards, John Hugh (Glamorgan, Mid) Lundon, Thomas Reddy, Michael
Elverston, Sir Harold Lyell, Charles Henry Redmond, John E.(Waterford)
Esmonde, Sir Thomas (Wexford, N.) Lynch, Arthur Alfred Redmond, William (Clare, E.)
Esslemont, George Birnie Macdonald, J. Ramsay (Leicester) Redmond, William Archer (Tyrone, E.)
Falconer, James Macdonald, J. M. (Falkirk Burghs) Richardson, Albion (Peckham)
Farrell, James Patrick McGhee, Richard Richardson, Thomas (Whitehaven)
Fenwick, Rt. Hon. Charles Maclean, Donald Roberts, Charles H.(Lincoln)
Ffrench, Peter Macnamara, Rt. Hon. Dr. T. J. Roberts, George H. (Norwich)
Field, William MacNeill, J. G. Swift (Donegal, South) Roberts, Sir J. H.(Denbighs)
Fiennes, Hon. Eustace Edward MacVeagh, Jeremiah Robertson, Sir G. Scott (Bradford)
Flavin, Michael Joseph M'Callum, Sir John M. Robertson, John M.(Tyneside)
France, Gerald Ashburner M'Curdy, Charles Albert Robinson, Sidney
Furness, Sir Stephen Wilson McKenna, Rt. Hon. Reginald Roch, Walter F.(Pembroke)
George, Rt. Hon. D. Lloyd M'Laren, Hon. H. D. (Leics.) Roche, Augustine (Louth)
Gladstone, W. G. C. M'Laren, Hon. F.W.S. (Lincs., Spalding) Roe, Sir Thomas
Glanville, Harold James Markham, Sir Arthur Basil Rowlands, James
Goddard, Sir Daniel Ford Marks, Sir George Croydon Russell, Rt. Hon. Thomas W.
Goldstone, Frank Marshall, Arthur Harold Samuel, Rt. Hon. H. L. (Cleveland)
Greenwood, Hamar (Sunderland) Meagher, Michael Scanian, Thomas
Greig, Colonel James William Meehan, Francis E.(Leitrim, N.) Scott, A. MacCallum (Glas., Bridgeton)
Griffith, Rt. Hon. Ellis Jones Meehan, Patrick J. (Queen's Co., Leix) Sheehy, David
Guest, Hon. Frederick E.(Dorset, E.) Middlebrook, William Sherwell, Arthur James
Gwynn, Stephen Lucius (Galway) Molloy, Michael Simon, Rt. Hon. Sir John Alisebrook
Hackett, John Moiteno, Percy Alport Smith, Albert (Lancs., Clitheroe)
Hancock, John George Money, L. G. Chiozza Smith, H. B. Lees (Northampton)
Harcourt, Rt. Hon. Lewis (Rossendale) Montagu, Hon. E. S. Smyth, Thomas F. (Leitrim, S.)
Harcourt, Robert V. (Montrose) Mooney, John J. Strauss, Edward A. (Southwark, West)
Harmsworth, Cecil (Luton, Beds) Morgan, George Hay Sutherland, John E.
Harvey, A. G. C.(Rochdale) Morrell, Philip Sutton, John E.
Harvey. T. E. (Leeds, West) Morison, Hector Taylor, Theodore C.(Radcliffe)
Haslam, Lewis Morton, Alpheus Cleophas Taylor, Thomas (Boiton)
Hayden, John Patrick Muldoon, John Tennant, Rt. Hon. Harold John
Hayward, Evan Munro, Rt. Hon. Robert Thomas, James Henry
Hemmerde, Edward George Murray, Captain Hon. Arthur C. Thorne, G. R.(Wolverhampton)
Henderson, Arthur (Durham) Needham, Christopher T. Toulmin, Sir George
Henderson, John M. (Aberdeen, W.) Neilson, Francis Trevelyan, Charles Philips
Henry, Sir Charles Nolan, Joseph Verney, Sir Harry
Hewart, Gordon Norton, Captain Cecil W. Walton, Sir Joseph
Higham, John Sharp Nugent, Sir Walter Richard Ward, John (Stoke-upon-Trent)
Hinds, John O'Brien, Patrick (Kilkenny) Wardle, George J.
Hobhouse, Rt. Hon. Charles E. H. O'Connor, John (Kildare. N.) Warner, Sir Thomas Courtenay T.
Hodge, John O'Connor, T. P. (Liverpool) Webb, Henry
Hogge, James Myles O'Doherty. Philip White, J. Dundas (Glasgow, Tradeston)
Holmes, Daniel Turner O'Dowd, John White, Sir Luke (Yorks, E.R.)
Holt, Richard Durning Ogden, Fred White, Patrick (Meath, North)
Hope, John Deans (Haddington) O'Kelly, Edward P. (Wicklow, W.) Whitehouse, John Howard
Howard, Hon. Geoffrey O'Kelly, James (Roscommon, N.) Whittaker, Rt. Hon. Sir Thomas P.
Hudson, Walter O'Malley, William Whyte, Alexander F.(Perth)
Hughes, Spencer Leigh O'Neill, Dr. Charles (Armagh, S.) Wiles, Thomas
Johnson, W. O'Shaughnassy, P. J. Williams, Aneurin (Durham, N.W.)
Jones, Edgar (Merthyr Tydvil) O'Sullivan, Timothy Williams, Penry (Middlesbrough)
Jones, Henry Haydn (Merioneth) Outhwaite, R. L. Williamson, Sir Archibald
Jones, J. Towyn (Carmarthen, East) Palmer, Godfrey Mark Wilson, W. T.(Westhoughton)
Jones, Leif (Notts, Rushcliffe) Parker, James (Halifax) Winfrey, Sir Richard
Jones, William (Carnarvonshire) Parry, Thomas H. Wing, Thomas Edward
Jones, William S. Glyn- (Stepney) Pearce, Robert (Staffs, Leek) Wood, Rt. Hon. T. McKinnon (Glasgow)
Joyce, Michael Pearce, William (Limehouse) Yeo, Alfred William
Kellaway, Frederick George Pease, Rt. Hon. Joseph A. (Rotherham) Young, William (Perthshire, East)
Kelly, Edward Philipps, Colonel Ivor (Southampton) Yoxall, Sir James Henry
Kennedy, Vincent Paul Phillips. John (Longford, S.)
Kenyon, Barnet Ponsonby, Arthur A. W. H. TELLERS FOR THE AYES.—Mr.
Kilbride, Denis Pratt, J. W. Illingworth and Mr. Gulland
King, Joseph
Agg-Gardner, James Tynte Banbury, Sir Frederick George Benn, Ion Hamilton (Greenwich)
Amery, L. C. M. S. Banner, Sir John S. Harmood- Bennett-Goldney, Francis
Anstruther-Gray, Major William Baring, Major Hon. Guy V.(Winchester) Bentinck, Lord H. Cavendish
Archer-Shee, Major Martin Barlow, Montague (Salford, South) Bird, Alfred
Ashley, Wilfrid W. Barnston, Harry Blair, Reginald
Astor, Waldorf Bathurst, Hon. A. B.(Glouc., E.) Boles, Lieut,-Colonel Dennis Fortescue
Baird, John Lawrence Bathurst, Charles (Wilts, Wilton) Bescawen, Sir Arthur S. T. Griffith
Baker, Sir Randolf L.(Dorset, N.) Beach, Hon. Michael Hugh Hicks Boyton, James
Baldwin, Stanley Benn, Arthur Shirley (Plymouth) Brassey, H. Leonard Campbell
Bridgeman, William Clive Hambro, Angus Valdemar Pryce-Jones, Colonel E.
Cull, Sir William James Hamilton, C. G. C. (Ches., Altrincham) Quilter, Sir William Eley C.
Burdett-Coutts, W. Hardy, Rt. Hon. Laurence Ratcliff, R. F.
Burgoyne, A. H. Harris, Henry Percy Rawlinson, John Frederick Peel
Burn, Colonel C. R. Harrison-Broadley, H. B. Rawson, Colonel Richard H.
Butcher, John George Henderson, Major H. (Berks, Abingdon) Rees, Sir J. D.
Campbell, Captain Duncan F.(Ayr, N.) Henderson, Sir A.(St. Geo., Han. Sq.) Ronaldshay, Earl of
Campion, W. R. Hewins, William Albert Samuel Rothschild, Lionel de
Carlile, Sir Edward Hildred Hibbert, Sir Henry F. Royds, Edmund
Cator, John Hills, John Waller Rutherford, John (Lancs., Darwen)
Cautley, H. S. Hohler, Gerald Fitzroy Rutherford, Watson (L'pool, W. Derby),
Cave, George Hope, James Fitzalan (Sheffield) Salter, Arthur Clavell
Cecil, Evelyn (Aston Manor) Hope, Major J. A. (Midlothian) Samuel, Sir Harry (Norwood)
Cecil, Lord Hugh (Ozford University) Horne, Edgar Samuel, Samuel (Wandsworth)
Cecil, Lord R.(Herts, Hitchin) Houston, Robert Paterson Sanders, Robert Arthur
Chaloner, Colonel R. G. W. Hunt, Rowland Sanderson, Lancelot
Clay, Captain H. H. Spender Hunter, Sir Charles Rodk. Sandys, G. J.
Clive, Captain Percy Archer Ingleby, Holcombe Sassoon, Sir Philip
Clyde, James Avon Jackson, Sir John Scott, Sir S.(Marylebone, W.)
Coates, Major Sir Edward Feetham Joynson-Hicks, William Smith, Rt. Hon. F. E. (L'pool, Walton)
Courthope, George Loyd Kerry, Earl of Spear, Sir John Ward
Craig, Norman (Kent, Thanet) Keswick, Henry Stanley, Hon. Arthur (Ormskirk)
Crichton-Stuart, Lord Ninian Kinloch-Cooke, Sir Clement Stanley, Hon. G. F.(Preston)
Croft, Henry Page Lane-Fox, G. R. Starkey, John Ralph
Dalrymple, Viscount Larmor, Sir J. Staveley-Hill, Henry
Dalziel, Davison (Brixton) Law, Rt. Hon. A. Bonar (Bootle) Stewart, Gershom
Denison-Pender, J. C. Lawson, Hon. H. (T. H'mts., Mile End) Strauss, Arthur (Paddington, North)
Denniss, E. R. B. Lee, Arthur Hamilton Swift, Rigby
Dickson, Rt. Hon, C. Scott Lewisham, Viscount Sykes, Alan John (Ches., Knutsford),
Duke, Henry Edward Lloyd, George Butler (Shrewsbury) Sykes, Sir Mark (Hull, Central)
Duncannon, Viscount Locker-Lampson, G. (Salisbury) Talbot, Lord Edmund
Du Pre, W. Baring Locker-Lampson, O.(Ramsey) Terrell, George (Wilts, N.W.)
Eyres-Monsell, Bolton M. Lockwood, Rt. Hon. Lt.-Colonel A. R. Terrell, Henry (Gloucester)
Faber, George Denison (Clapham) Mackinder, Halford J. Thomas-Stanford, Charles
Falle, Bertram Godfray Macmaster, Donald Tickler, T. G.
Fell, Arthur Magnus, Sir Philip Tobin, Alfred Aspinall
Finlay, Rt. Hon. Sir Robert Malcolm, Ian Touche, George Alexander
Fisher, Rt. Hon. W. Hayes Mallaby-Deeley, Harry Tryon, Captain George Clement
Fitzroy, Hon. E. A. Mason, James F. (Windsor) Valentia, Viscount
Foster, Philip Staveley Mills, Hon. Charles Thomas Walker, Colonel William Hall
Gardner, Ernest Morrison-Bell, Capt. E. F.(Ashburton) Ward, A. S.(Herts, Watford)
Gastrell, Major W. Houghton Morrison-Bell, Major A. C.(Honiton) Warde, Colonel C. E.(Kent, Mid)
Gibbs, G. A. Mount, William Arthur. Weigall, Captain A. G.
Gilmour, Captain John Neville, Reginald J. N. Weston, Colonel J. W.
Giazebrook, Captain Philip K. Newdegate, F. A. Williams, Colonel R.(Dorset, W.)
Goldman, C. S. Newman, John R. P. Wilson, A. Stanley (Yorks, E.R.)
Goldsmith, Frank Newton, Harry Kottingham Wilson, Captain Leslie O.(Reading)
Goulding, Edward Alfred Nicholson, William G. (Petersfield) Wilson, Maj. Sir M.(Bethnal Green, S.W.)
Grant, James Augustus Nield, Herbert Wood, Hon. E. F. L.(Yorks, Ripon)
Greene, Walter Raymond Orde-Powlett, Hon. W. G. A. Wood, John (Stalybridge)
Gretton, John Ormsby-Gore, Hon. William Wortley, Rt. Hon. C. B. Stuart-
Guinness, Hon. Rupert (Essex, S.E.) Paget, Almeric Hugh Yate, Colonel C. E.
Guinness, Hon. W. E.(Bury S. Edmunds) Pease, Herbert Pike (Darlington) Younger, Sir George
Gwynne, R. S.(Sussex, Eastbourne) Perkins, Walter Frank
Haddock, George Bahr Peto, Basil Edward
Hall, D. B.(Isle of Wight) Pollock, Ernest Murray TELLERS FOR THE NOES.—Mr.
Hall, Frederick (Dulwich) Pretyman, Ernest George Worthing Evans and Mr. Cassel.
Hall, Marshall (E. Toxteth) Prothero, Rowland Edmund

I beg to move, at the end of the first paragraph, to add the words,

"and in particular for the purpose of computing Income Tax in respect of securities, stocks, shares, or rents to which this section applies in pursuance of the rules under the fourth and fifth cases in section one hundred of the Income Tax Act, 1842, the income arising from the securities, stocks, shares, or rents shall be substituted for the sums, profits, or gains, as the case requires, received therefrom in the United Kingdom."

The object of this Amendment has been explained by my right hon. and learned Friend. It is that companies and others who have been holding income up in past years and reinvesting it, shall start with a clean sheet. If we were to treat this capitalised income as income for the year, it might be left abroad or in the Colony. In order to enable those who have been in the habit of rolling up their income and reinvesting it, to start with a clean sheet, we propose this Amendment.


The Chancellor of the Exchequer has explained that his right hon. and learned Friend has explained this Amendment. I am quite certain that most of those who listened to the explanation of the right hon. and learned Gentleman, notwithstanding his great cleverness, were left in considerable doubt as to what the Amendment really means. I confess I am in complete doubt as to what the Amendment means and what is proposed by the Chancellor of the Exchequer. Let me try to elucidate it by a few questions. I understand that the right hon. Gentleman proposes to give to the insurance companies and others a clean sheet, that they are to start afresh, that if they like they are to bring over accumulated income which has arisen in previous years, but which was not taxed because it was not brought over here, and that they are to be able to bring it over here without being taxed. Is that the intention?

Mr. LLOYD GEORGEindicated assent.


If that is the explanation, then the Amendment requires some justification, because if they brought it over here before the Bill is passed, it would be subject to taxation, and it is these very people who have evaded or escaped Income Tax by leaving the income abroad. The Chancellor of the Exchequer is now going to say to them, "Bring it over now. We will let it go free," whereas if they had brought it over last week or the week before it would have been subject to taxation. I do not know on what grounds that can be justified. It may be because the right hon. Gentleman has some influential hon. and right hon. Gentlemen behind him who see what the grievances of the insurance companies are, and he is proposing to meet them in this way. It seems to be quite the wrong way to meet them. They have real grievances which ought to be met on equitable grounds, but this sop or bribe, as it appears to be, to his hon. and learned Friends behind him, seems without any justification whatever. The right hon. Gentleman is going the wrong way to work. That is the explanation of the intention of the Chancellor of the Exchequer. Does the Amendment carry it out? I very much doubt it. There is nothing about the clean sheet, nothing about the mystic date, the 5th of April, in (he Amendment or by reference to anything in the Amendment. It seems that the words of the Amendment, as the learned Attorney-General seemed to think in one of his previous explanations to the Committee, are such as would cause to be taxed any income which has been held back in a foreign country.

The Committee will remember that when the Attorney-General was explaining it, he said it was not the intention of the Government to tax accumulated capital. It was my hon. Friend the Member for Brentford (Mr. Joynson-Hicks) who asked him to explain that, and suggested that it really meant capitalised income. The Attorney-General did not tell us about capitalised income before that moment. It seemed to be quite an afterthought on his part to accept the suggestion of my hon. Friend the Member for Brentford, and to say that what they did intend to let off was capitalised income. If it is capitalised income that he intends to let off, perhaps he will explain what capitalised income is? Suppose it is money lying at the bank as the current balance of an insurance company. Can you follow that income and say that a particular sovereign was derived from a particular investment, and it has remained a sovereign in that bank; or can you trace it into another form? Can you say that it has been invested in a security, some bond, or stock, or share, and that thereby it has changed its character of income and has become capital. It is a very convenient term of ordinary commerce to talk about capitalised income, and everyone broadly knows what it means when used in that way, that it is a surplus incoming which has not been spent but retained and invested. But is that the sort of capitalised income that the right hon. Gentleman means, or does he mean the whole of the income received from securities, which income has been left abroad? If the right hon. Gentleman means anything at all he does not mean capitalised income in the ordinary commercial sense, but the total income, dividend, interest and so on that have been left to accumulate abroad. That is totally different from what we ordinarily call capitalised income, which is the surplus income of one year, which has been treated as capital account, and invested to produce income one year. So far as it goes the Clause is probably right, but it has not got the effect that either the Chancellor of the Exchequer or the Attorney-General claim for it. It will not let off, in my judgment, the insurance companies at all, and presently when they come to rely upon it they will find that they are taxed on that so-called capitalised income.


The hon. Member has asked what is the reason and justification for this alteration. When I spoke earlier I gave the justification for it. It is a question of expediency for the benefit of the London financial market. This money is now collected abroad. In order to avoid being taxed here it must be again invested abroad and kept there. Consequently it does not come to this country. The moment it comes to this country it is taxed. What is the result? Since it was decided that this money would be taxed when it was brought back to this country, not a single penny of it has been brought, back by insurance offices, and it never will be. Therefore you will never get the tax upon it. But what is the result of keeping it out yonder? It is that it is invested again in securities out of this country. It is invested through brokers and bankers in New York, Montreal, or elsewhere. It is lost to the business men of the City of London. If that money were in the City of London for investment some of it might be invested in British securities. So long as you make it liable to taxation it will remain out yonder and will be so invested. Take the case of private individuals who may accumulate their money here. It is not necessary to keep the securities out yonder. The securities are already in this country, and the tax does not become payable until the securities are turned into cash here. When a private individual has the securities here, and afterwards they are turned into cash, do you think he will return it as income? Not a bit of it, and on the ground urged by the hon. Member that the taxes should apply equally to all, it is desirable that this provision should be made, because larger investing companies and insurance offices will not bring their money home, but if they did they would return and pay on it. The simple fact is that it will not be brought here, and, therefore, it does not mean that you are losing any revenue whatever. But it does mean that when you give this clean sheet, we are to pay the tax on all the income from 5th April last. After that it will be brought here and invested, and that will be an advantage to the London market.


I am not quite sure that I follow what has been said by the right hon. Gentleman. As I understand it, the right hon. Gentleman says very truly that where an insurance company has received interest from investments abroad they kept it abroad sooner than bring it over here to be taxed. The right hon. Gentleman says that this Clause is going to give them a clean sheet for doing that which the Chancellor of the Exchequer and the Attorney-General say was wrong, and because they have done wrong in the past they are going to do right in the future. I am not at all certain that they are going to do right in the future. Neither am I certain that this Clause has that effect. I do not wish to say anything disrespectful of the Attorney-General, but I think he really does not understand the meaning of this particular Amendment, or the meaning of the Clause. The right hon. Gentleman (Sir T. Whittaker) told us that an insurance company paid losses out of premiums and investments. Surely that is not so. The only income it has ever received is upon premiums, and therefore to say that an insurance company took the whole of the premiums to pay losses and made up the difference out of income, is to say that all the insurance companies are insolvent. There can be no question about it. I do not blame the Attorney-General. We are discussing Clauses which very few people in this Committee at the present moment understand. I do not believe the right hon. Gentleman the Member for the Spen Valley Division understands this Amendment. I am quite certain that I do not, and I am also quite certain that the Attorney-General does not. The real fact is that all this is done in order to catch somebody who, you suppose, is evading the tax. If there is anyone evading the tax, he is clever enough to evade it whatever you do. But what you are going to do is to tax people who are endeavouring to earn an honest livelihood. You will not tax the man who is evading. I am not at all sure what the result of this Amendment will be. Persons who have businesses abroad, and who get profits in the ordinary way from those businesses, provided they are domiciled in this country, will not be subject to the tax. But if they get profits from investment, whether insurance companies or private individuals, they will be subject to the tax under the Clause, and therefore the result will be that the people of whom the right hon. Gentleman speaks will be taxed because their profits come from investments, though if they were carrying on an ordinary business they would not be taxed. Is that fair? That is the result of this proposal.

Sir T. WHITTAKERindicated dissent.


It is no use for the right hon. Gentleman to shake his head. That is the result of the Clause. If the right hon. Gentleman were to establish abroad the insurance company which he represents and entered into ordinary commercial business, as long as he was domiciled over here he would not be subject to the tax, but if he invested the savings and profits in foreign securities, then he would be liable for the tax on those investments. There can be no other way out of it. What does this mean?

"the income arising from the securities, stocks, shares, or rents shall be substituted for the sums, profits, or gains, as the case requires, received therefrom in the United Kingdom."

I cannot understand it. The Chancellor of the Exchequer said that the Attorney-General had explained it. He was in the House for only a portion of the speech—only when the Attorney-General said that it is a ghastly thing to have to explain. It is a very ghastly thing to have to explain. If I was Chancellor of the Exchequer, and my Attorney-General had said that, I would have something to say to him about it. Now that he has got advice, perhaps he will explain what those words do mean, and then I may have something further to say.


The whole of your Amendments are directed to relief, and when you get relief it does not please you. The hon. Baronet says that people have been doing wrong. They have been doing nothing of the kind. There is no law against any man investing abroad income which he receives abroad.


I did not say that they were doing wrong, but from the point of view of the right hon. Gentleman it was wrong.


And the insurance companies or anybody else is perfectly entitled to take his interest over there, and buy fresh securities and leave them there. That is what they have done. The Chancellor of the Exchequer is getting them to give up this thing, because if he does not let these investments return to this country free they will remain there, and all these hon. Gentlemen will talk about money invested abroad. We want to bring it back and have it invested here. Have you any objection to that? People have been doing exactly what they are entitled to do according to law, converting their interest into capital on the other side. They have kept their capital there, and accumulated it there, and there it will remain. But the Chancellor is willing that it should be brought back there and invested in this country, instead of being invested over there. What objection can you possibly have to that? All your cry was that the money was going out of the country. I think that it is a very necessary Amendment. So far as it may not be very clear, I think the hon. Baronet did not read the Clause properly. It has reference to the Income Tax Act of 1842, and these previous words are to be substituted for the words in the Act of 1842. I think it is a most excellent thing, and a thing of which you should be the last people in the world to complain, that a large quantity of capital can be transferred into this market and invested in British securities which is the whole object of this Clause.


I do not think the Chancellor of the Exchequer is to be congratulated either upon the clearness with which the Amendment is drawn or the clearness with which the intention of it has been explained. His Budget being a bungled and muddled one, it looks as if that process was to go on to the end. The Attorney-General says that capitalised income, earned abroad is not to be taxed when it comes over here. I should like to ask, first of all, would it be taxed under the existing law if brought over here. If so, as I conceive it would, why should we exempt it. [An HON. MEMBER; "Why not?"] Why should it? If it was right to tax it in the past why should it not be right to tax it now? I see no reason why we should not put a tax upon it when it is brought over, except that the supporters of the Government want it brought over. May I ask the Attorney-General the meaning of "capitalised income"? Take the case of a company. The capitalised income of a shareholder cannot merely mean certain income invested, because the money is often invested in the reserve fund for the purpose of equalising dividends, and so on. It is an amount of surplus income so capitalised that it is brought into capital account. If so, then I think it ought to be made to pay. Then again, comes the individual, and "capitalised income" applies to him as well as to a company. What is the meaning of capitalised income earned abroad as applied to the individual? Suppose a man has capital abroad, earning income last year, and he did not bring over his income to this country, but invested it abroad: would that be capitalised income? Neither the explanation of the hon. Gentleman (Mr. Henderson), although he may be right or may be wrong, nor that of the learned Attorney-General will have the slightest effect when the Clause comes to be interpreted by the Courts. I say that with all the respect which is due to the Attorney-General. Therefore, I submit, that the proper course for the Government to adopt is to withdraw this Clause so that they may reconsider what will be the effect of it. In that way we should be able to divide on some intelligible Clause, after we have had defined this question of capitalised income, which is of such a very vague character. If we go to a Division on a Clause which is unintelligible in itself, and which is not made more intelligible by the explanation offered by the hon. Gentleman opposite, we shall not be in a position to give an intelligent vote. Therefore, I submit, that we ought to have some further explanation, and then the Clause should be withdrawn.


The hon. and learned Gentleman began by asking whether capital transmitted to this country—


I said capitalised income.


At any rate, I thought the hon. and learned Gentleman first asked whether capital transmitted to this country, whether returned as capitalized income or anything else—


I used the right hon. Gentleman's own words, "capitalised income earned abroad." I asked would that, under the existing law, be the subject of taxation in this country?


Let me avoid any difficulty by making my own observations without reference to what the hon. Gentleman said. I conceive Income Tax law applies to income and not capital. I am quite confident the Courts would take that view, because the House of Lords has said so. It is, no doubt, a difficult question sometimes to decide where the boundary line is to be drawn between what is income and capital. Using the expression capitalised income created confusion. What was referred to by the right hon. Gentleman the Member for Spen Valley (Sir T. Whittaker), was what was in my mind. Under our present Income Tax you have enterprises which earn profits abroad, and instead of transmitting those profits to this country, keep them abroad. I presume if those enterprises are well managed they do something with those profits? That is what I meant by capitalised income, whatever be its form, whether in reserve fund or otherwise. I apprehend that as long as the law remains what it is those enterprises are never likely to send any of that money to this country. Our object and policy is to secure that, inasmuch as we are going to impose this tax upon income even when it is earned and kept abroad, there should be a clean sheet in the matter. That is to say, if they send those funds to this country which they otherwise would not send, they shall not be penalised because they do. That is what I mean. I quite agree that there are difficulties. There are bound to be in drawing the line between what is properly classed as income and what is not. The intention which we have expressed is we believe carried out by giving that exemption. Obviously it would not be right if you are going to tax income earned abroad to tax that income over again when at three or four years' interval it is sent to this country. These words are designed to have that effect, and there is no need to withdraw anything. The Clause is by common consent an improvement, and the Amendment is an improvement on the Clause, as there was a doubt that the Clause would in certain cases tax things twice over, which it is not the intention of anybody here to do. The Clause is a very difficult Clause to be certain of, and that is because of the nature of the subject. The best thing to do is to add this Amendment to the Bill, and the Committee will then have the opportunity of seeing the Clause in that form, and if there be substance in the criticisms made those can be considered and debated. [HON, MEMBERS: "When?"]


The right hon. Gentleman has told us what the object of the Clause is: it is to give a clean sheet with regard to the past. For myself, I agree with the right hon. Baronet (Sir T. Whittaker) that the Clause, so far as insurance companies are concerned, will be some small measure of compensation for the injustice that is being done. But our complaint is not with regard to the object, but that these words do not give effect to the object. They do not come within miles of doing so. These works deal entirely with the future, and not with the past at all. In regard to the future they do provide that there shall not be double taxation—that you shall not tax income because it is income earned abroad and not brought to this country and then tax it again when it comes as income brought into this country. But that is entirely with regard to the future. It is not treating the right hon. Baronet (Sir T. Whittaker) fairly to leave him under the impression that this gives him a clean sheet. I submit that it does not, and I would ask the right hon. Baronet to consider it very carefully before he accepts it. What words are there which have any reference to the past at all? I agree that relief ought to be given in respect of the past, but this Amendment does not give it or come anywhere near giving it.


I must confess I am astounded to hear the right hon. Baronet (Sir T. Whittaker), and the hon. Member for Aberdeen (Mr. J. M. Henderson), arguing that this tax would affect the investments of insurance companies abroad. Why do insurance companies invest abroad? Only because they have large surplus funds from which they can get a better return abroad than in this country. Do hon. Members imagine that this tax is going to make these companies return the money to this country? It is ludicrous. Does any Member of the Government imagine that their Income Tax is going to affect to that extent the operations of the great insurance companies? I agree that this proposition may interfere with the full flow of the investment of capital abroad. That is another matter. But to imagine that these great companies, because of this Amendment, are going to send their accumulated funds back to this country, is to imagine the impossible. The only thing that would compel insurance or any other companies to bring their capital back to this country would be the fact that they could get a better return upon it here than abroad. If there is a better return to be obtained in the Argentine, Brazil, or India, this tax will have little effect. It will have the effect of penalising to a certain extent the free flow of investments abroad, and, as the hon. Baronet (Sir F. Banbury) pointed out, it penalises the in- vestors in stocks and shares as against ordinary merchants who may have interests in businesses abroad. The Clause is badly drawn, and ought to be reconsidered before we are asked to vote upon it. It seems to me to be unwise, and based upon a wrong principle. It interferes with the free flow of the investment of capital abroad. The investment of capital abroad is not a bad thing for this country. Whether it is invested in Brazil, the Argentine, or India, it goes out of this country in the shape of goods. The more capital we have to invest abroad the more we stimulate industries and manufactures in this country. Why should we penalise the investment of capital abroad: capital only goes abroad because it gets a better return than in this country. The more use you can make of capital in any part of the world the better for British industry! Therefore, to my mind, a Clause like this is interfering with those principles for which we on this side of the House stand. We are supposed to be Free Traders, and here we are giving a preference to traders as against investors. Why should we do it? We are interfering in the great investment businesses of the insurance companies, for if they make a good investment in any part of the world they deserve a good return for their enterprise. They are thereby enabled to give a better return, a better bonus, better dividends to the shareholders, and better terms to the insurers. To attempt to follow capital abroad will be to bring about means to evade the tax; it will lead to a great deal of perjury, corruption, and dishonest statements, and it is, to my mind, neither reasonable nor sound common sense.


After the Debate we have heard we have rather less comprehension of the real inwardness of this Clause than when we started at seven o'clock. I think everyone on this side is at one with hon. Gentlemen on the other side and with the Chancellor of the Exchequer in desiring a tax on money placed abroad merely for the purpose of evading the legitimate taxation of this country. At the same time I am not convinced that this Clause will have the effect. For my part, I am very doubtful whether you will not leave these people free and tax others twice over—people that you do not desire to tax. Not one word has been said in the replies as to the taxation of people whose property is in India. We have had little information as to how rents are to be taxed—I do not see how it is possible to tax rents—and to make deductions from those rents proportionate or equivalent to the deductions which would be made if the rents were received in the United Kingdom.

Such a phrase as that is strongly inviting litigation. It is most indeterminate. Before this Clause is accepted it ought to be considered either by the Select Committee that is to be set up, or certainly by some responsible body of business men with real knowledge of investments both at home and abroad. In this matter we do not know on what business men in the City the Chancellor of the Exchequer has relied for advice. So far as opinion has been expressed in this House he has had no support from anyone with authority to speak on financial questions. Under these circumstances, I think the Committee will be taking a very grave responsibility in passing this Clause into law with the information at present before it. I submit we have no right to pass this Clause, which may have most far-reaching, most mischievous, and most dangerous effects, until we are satisfied that not only the principle it is supposed to carry out is one with which we agree in detail, but that the actual provision will effect that which we desire and will not do more injury in another direction.


The Debate we have had, although interesting in many respects, must have convinced us of the justification of the Government proposal for the time limit with regard to discussion upon the present Finance Bill. Let us consider for one moment the use which has actually been made of the time at the disposal of the House of Commons. [Interruptions.]


We had better not spend any more time upon that point now and keep to the Amendment,


I will pass by that and confine myself strictly to the Clause we are now dealing with. For many hours the time spent has, I submit, been wasted. [HON. MEMBERS: "Sit down," Interruptions.]


I have asked the hon. Member to keep to the Amendment now before the Committee.


We might have gone on until one o'clock discussing the Finance Bill every night if the Opposition had not opposed it. I agree with the hon. and learned Member who has just sat down. This Amendment and the Clause as it stands still leaves me in doubt as to what is meant. It will mean that judges will have to construe it, and judges construe Acts of Parliament very often in a different manner entirely from what the House of Commons intended, and totally different from what the Government wished. In my view of this Amendment anyone can evade this tax who wishes to do so. If an insurance company wishes to invest funds of £100,000 in ordinary £1 shares in a company at Winnipeg, and if instead of forming a company with a capital of £100,000 it forms a company of £1,000 and treats the rest of the money as loans, then in that case the company can repay to the shareholders in England all the interest on the loans without a penny of Income Tax.

It being Eleven of the clock, the CHAIRMAN proceeded, pursuant to the Order of the House of 8th July, to put forthwith the Question on the Amendment already proposed from the Chair.

Question put, "That those words be there inserted."

The Committee divided: Ayes, 280; Noes, 190.

Division No. 166.] AYES. [11.0 p.m.
Abraham, Wiliam (Dublin, Harbour) Arnold, Sydney Beauchamp, Sir Edward
Acland, Francis Dyke Asquith, Rt. Hon. Herbert Henry Beck, Arthur Cecil
Adamson, William Baker, H. T. (Accrington) Benn, W. W.(T. Hamlets, St. George)
Addison, Dr. Christopher Baker, Joseph Allen (Finsbury, E.) Bethell, Sir J. H.
Agar-Robartes, Hon. T. C. R, Balfour, Sir Robert (Lanark) Black, Arthur W.
Agnew, Sir George William Baring, Sir Godfrey (Barnstaple) Boland, John Pius
Ainsworth, John Stirling Barlow, Sir John Emmott (Somerset) Booth, Frederick Handel
Alden, Percy Barnes, George N. Bowerman, Charles W.
Allen, Arthur A.(Dumbartonshire) Barran, Sir John N. (Hawick Burghs) Boyle, Daniel (Mayo, North)
Allen, Rt. Hon. Charles P.(Stroud) Barran, Rowland Hurst (Leeds, N.) Brady, Patrick Joseph
Armitage, Robert Beale, Sir William Phipson Brunner, John F. L.
Bryce, J. Annan Holt, Richard Burning Pease, Rt. Hon. Joseph A.(Rotherham)
Buckmaster, Sir Stanley O. Hope, John Deans (Haddington) Philipps, Colonel Ivor (Southampton)
Burns, Rt. Hon. John Howard, Hon. Geoffrey Phillips, John (Longford, S.)
Burt, Rt. Hon. Thomas Hudson, Walter Pirie, Duncan V.
Buxton, Noel Hughes, Spencer Leigh Ponsonby, Arthur A. W. H.
Byles, Sir William Pollard Illingworth, Percy H. Pratt, J. W.
Carr-Gomm, H. W. Johnson, W. Price, C. E. (Edinburgh, Central)
Cawley, Sir Frederick (Prestwich) Jones, Edgar (Merthyr Tydvil) Price, Sir Robert J. (Norfolk, E.)
Cawley, Harold T.(Lancs., Heywood) Jones, H. Haydn (Merioneth) Priestley, Sir Arthur (Grantham)
Chancellor, Henry George Jones, J. Towyn (Carmarthen, East) Primrose, Hon. Neil James
Chappie, Dr. William Allen Jones, Leif (Notts, Rushcliffe) Pringle, William M. R.
Clancy, John Joseph Jones, William S. Glyn- (Stepney) Radford, George Heynes
Clough, William Joyce, Michael Raffan, Peter Wilson
Clynes, John R. Kellaway, Frederick George Rea, Rt. Hon. Russell (South Shields)
Collins, Godfrey P.(Greenock) Kelly, Edward Rea, Walter Russell (Scarborough)
Collins, Sir Stephen (Lambeth) Kennedy, Vincent Paul Reddy, Michael
Compton-Rickett, Rt. Hon. Sir J. Kenyon, Barnet Redmond, John E.(Waterford)
Cornwall, Sir Edwin A. Kilbride, Denis Redmond, William (Clare, E.)
Craig, Herbert J.(Tynemouth) King, Joseph Redmond, William Archer (Tyrone, E.)
Crooks, William Lambert, Rt. Hon. G. (Devon, S. Molton) Richardson, Albion (Peckham)
Crumley, Patrick Lambert, Richard (Wilts, Cricklade) Richardson, Thomas (Whitehaven)
Cullinan, John Lardner, James C. R. Roberts, Charles H.(Lincoln)
Dalziel, Rt. Hon. Sir J. H. (Kirkcaldy) Law, Hugh A.(Donegal, West) Roberts, George H. (Norwich)
Davies, David (Montgomery Co.) Lawson, Sir W. (Cumb'rld, Cockerm'th) Roberts, Sir J. H. (Denbighs)
Davies, Ellis William (Eifion) Leach, Charles Robertson, Sir G. Scott (Bradford)
Davies, Timothy (Lincs., Louth) Levy, Sir Maurice Robertson, John M. (Tyneside)
Davies, Sir W. Howell, (Bristol, S.) Lewis, Rt. Hon. John Herbert Robinson, Sidney
Dawes, James Arthur Low, Sir Frederick (Norwich) Roch, Walter F.(Pembroke)
Delany, William Lundon, Thomas Roche, Augustine (Louth)
Denman, Hon. Richard Douglas Lyell, Charles Henry Roe, Sir Thomas
Dewar, Sir J. A. Lynch, Arthur Alfred Rowlands, James
Dickinson, Rt. Hon. Willoughby H. Macdonald, J. Ramsay (Leicester) Runciman, Rt. Hon. Walter
Dillon, John Macdonald, J. M. (Falkirk Burghs) Russell, Rt. Hon. Thomas W.
Doris, William McGhee, Richard Samuel, Rt. Hon. H. L. (Cleveland)
Duffy, William J. Maclean, Donald Scanlan, Thomas
Duncan, C. (Barrow-in-Furness) Macnamara, Rt. Hon. Dr. T. J. Scott, A. MacCallum (Glas., Bridgeton)
Duncan, Sir J. Hastings (Yorks, Otley) MacNeill, J. G. Swift (Donegal, South) Seely, Rt. Hon. Colonel J. E. B.
Edwards, Sir Francis (Radnor) MacVeagh, Jeremiah Sheehy, David
Edwards, John Hugh (Glamorgan, Mid) M'Callum, Sir John M. Sherwell, Arthur James
Elverston, Sir Harold M'Curdy, C. A. Simon, Rt. Hon. Sir John Alisebrook
Esmonde, Sir Thomas (Wexford, N.) McKenna, Rt. Hon. Reginald Smith, Albert (Lancs., Clitheroe)
Esslemont, George Birnie M'Laren, Hon. H. D.(Leics.) Smith, H. B. Lees (Northampton)
Falconer, James M'Laren, Hon. F.W.S.(Lincs., Spalding) Smyth, Thomas F. (Leitrim, S.)
Farrell, James Patrick Marks, Sir George Croydon Spicer, Rt. Hon. Sir Albert
Fenwick, Rt. Hon. Charles Marshall, Arthur Harold Strauss, Edward A.(Southwark, West)
Ffrench, Peter Meagher, Michael Sutherland, John E.
Field, William Meehan, Francis E. (Leitrim, N.) Sutton, John E.
Fiennes, Hon. Eustace Edward Meehan, Patrick J. (Queen's Co., Leix) Taylor, Theodore C. (Radcliffe)
Flavin, Michael Joseph Middlebrook, William Taylor, Thomas (Bolton)
France, G. A. Molloy, Michael Tennant, Rt. Hon. Harold John
Furness, Sir Stephen Wilson Molteno, Percy Alport Thomas, J. H.
Gcarge, Rt. Hon. D. Lloyd Mond, Rt. Hon. Sir Alfred Thorne, G. R. (Wolverhampton)
Gladstone, W. G. C. Money, L. G. Chiozza Toulmin, Sir George
Glanville, Harold James Montagu, Hon. E. S. Trevelyan, Charles Philips
Goddard, Sir Daniel Ford Mooney, John J. Verney, Sir Harry
Goldstone, Frank Morgan, George Hay Walton, Sir Joseph
Greenwood, Hamar (Sunderland) Morrell, Philip Ward, John (Stoke-upon-Trent)
Greig, Colonel James William Morison, Hector Wardle, George J.
Grey, Rt. Hon. Sir Edward Morton, Alpheus Cleophas Warner, Sir Thomas Courtenay T.
Griffith, Rt. Hon. Eilis Jones Muldoon, John Wason, Rt. Hon. E.(Clackmannan)
Guest, Hon. Frederick E.(Dorset, E.) Munro, Rt. Hon. Robert Wason, John Cathcart (Orkney)
Gulland, John William Murray, Captain Hon. Arthur C. Watt, Henry A.
Gwynn, Stephen Lucius (Galway) Needham, Christopher T. White, J. Dundas (Glasgow, Tradeston)
Hackett, John Neilson, Francis White, Sir Luke (Yorks, E.R.)
Hancock, J. G. Noian, Joseph White, Patrick (Meath, North)
Harcourt, Rt. Hon. Lewis (Rossendale) Norton, Captain Cecil W. Whitehouse, John Howard
Harcourt, Robert V. (Montrose) Nugent, Sir Walter Richard Whittaker, Rt. Hon. Sir Thomas P.
Harmsworth, Cecil (Luton, Beds) O'Brien, Patrick (Kilkenny) Whyte, Alexander F. (Perth)
Harvey, A. G. C. (Rochdale) O'Connor, T. P. (Liverpool) Wiles, Thomas
Harvey, T. E. (Leeds, West) O'Doherty, Philip Williams, Aneurin (Durham, N.W.)
Haslam, Lewis O'Dowd, John Williams, Penry (Middlesbrough)
Hayden, John Patrick Ogden, Fred Williamson, Sir Archibald
Hayward, Evan O'Kelly, Edward P. (Wicklow, W.) Wilson, W. T.(Westhoughton)
Hemmerde, Edward George O'Malley, William Winfrey, Sir Richard
Henderson, Arthur (Durham) O'Neill, Dr. Charles (Armagh, S.) Wing, Thomas Edward
Henderson, John M. (Aberdeen, W.) O'Shaughnessy, P. J. Wood, Rt. Hon. T. McKinnon (Glasgow)
Henry, Sir Charles O'Sullivan, Timothy Yeo, Alfred William
Hewart, Gordon Outhwaite, R. L. Young, William (Perthshire, East)
Higham, John Sharp Palmer, Godfrey Mark Yoxall, Sir James Henry
Hinds, John Parker, James (Halifax)
Hobhouse, Rt. Hon. Charles E. H. Parry, Thomas H.
Hodge, John Pearce, Robert (Staffs, Leek) TELLERS FOR THE AYES.—
Hogge, James Myles Pearce, William (Limehouse) Mr. William Jones and Mr. H. Webb.
Holmes, Daniel Turner Pearson, Hon. Weetman H. M.
Agg-Gardner, James Tynte Gibbs, G. A. Nicholson, William G.(Petersfield)
Anstruther-Gray, Major William Gilmour, Captain John Nield, Herbert
Archer-Shee, Major Martin Glazebrook, Captain Philip K. Orde-Powlett, Hon. W. G. A.
Ashley, Wilfrid W. Goulding, Edward Alfred Paget, Almeric Hugh
Astor, Waldorf Greene, Walter Raymond Parker, Sir Gilbert (Gravesend)
Baird, John Lawrence Gretton, John Pease, Herbert Pike (Darlington)
Baldwin, Stanley Guinness, Hon. Rupert (Essex, S.E.) Peel, Lieut.-Colonel R. F.
Banner, Sir John S. Harmood- Guinness, Hon. W. E. (Bury S. Edmunds) Perkins, Walter Frank
Baring, Major Hon. Guy V. (Winchester) Haddock, George Bahr Peto, Basil Edward
Barlow, Montague (Salford, South) Hall, D. B.(Isle of Wight) Pollock, Ernest Murray
Barnston, Harry Hall, Frederick (Dulwich) Pretyman, Ernest George
Bathurst, Hon. Allen B.(Glouc, E.) Hall, Marshall (E. Toxteth) Prothero, Rowland Edmund
Bathurst, Charles (Wilts, Wilton) Hambro, Angus Valdemar Pryce-Jones, Colonel E.
Beach, Hon. Michael Hugh Hicks Hamilton, C. G. C. (Ches., Altrincham) Ratcliffe, R. F.
Benn, Arthur Shirley (Plymouth) Hardy, Rt. Hon. Laurence Rawlinson, John Frederick Peel
Benn, Ion Hamilton (Greenwich) Harris, Henry Percy Rawson, Colonel Richard H.
Bennett-Goldney, Francis Harrison-Broadley, H. B. Rees, Sir J. D.
Bentinck, Lord H. Cavendish- Henderson, Major H. (Berks, Abingdon) Ronaldshay, Earl of
Bird, Alfred Henderson, Sir A. (St. Geo., Han. Sq.) Royds, Edmund
Blair, Reginald Herbert, Hon. A. (Somerset, S.) Rutherford, Watson (L'pool, W. Derby)
Boles, Lieut.-Colonel Dennis Fortescue Hewins, William Albert Samuel Salter, Arthur Clavell
Boscawen, Sir Arthur S. T. Griffith- Hibbert, Sir Henry F. Samuel, Sir Harry (Norwood)
Bowden, Major S. Harland Hills, John Waller Samuel, Samuel (Wandsworth)
Boyton, James Hoare, Samuel John Gurney Sanders, Robert Arthur
Brassey, H. Leonard Campbell Hohler, Gerald Fitzroy Sanderson, Lancelot
Bridgeman, William Clive Hope, James Fitzalan (Sheffield) Sandys, G. J.
Bull, Sir William James Hope, Major J. A. (Midlothian) Sassoon, Sir Philip
Burdett-Coutts, William Home, Edgar Scott, Sir S.(Marylebone, W.)
Burgoyne, Alan Hughes Houston, Robert Paterson Spear, Sir John Ward
Burn, Colonel C. R. Hunt, Rowland Stanley, Hon Arthur (Ormskirk)
Butcher, John George Hunter, Sir Charles Rodk. Stanley, Hon. G. F. (Preston)
Campbell, Captain Duncan F.(Ayr, N.) Ingleby, Holcombe Starkey, John Ralph
Campion, W. R. Jackson, Sir John Staveley-Hill, Henry
Carlile, Sir Edward Hildred Jessel, Captain H. M. Steel-Maitland, A. D.
Cator, John Joynson-Hicks, William Stewart, Gershom
Cautley, Henry Strother Kerry, Earl of Swift, Rigby
Cecil, Evelyn (Aston Manor) Keswick, Henry Sykes, Alan John (Ches., Knutsford)
Cecil, Lord Hugh (Oxford University) Kinloch-Cooke, Sir Clement Sykes, Sir Mark (Hull, Central)
Cecil, Lord R.(Herts, Hitchin) Lane-Fox, G. R. Talbot, Lord Edmund
Chaloner, Colonel R. G. W. Larmor, Sir J. Terrell, George (Wilts, N.W.)
Clay, Captain H. H. Spender Law, Rt. Hon. A. Bonar (Bootle) Terrell, Henry (Gloucester)
Clive, Captain Percy Archer Lawson, Hon. H. (T. H'mts., Mile End) Thomas-Stanford, Charles
Clyde, James Avon Lewisham, Viscount Thynne, Lord Alexander
Coates, Major Sir Edward Feetham Lloyd, George Butler (Shrewsbury) Tickler, T. G.
Courthope, George Loyd Locker-Lampson, G. (Salisbury) Tobin, Alfred Aspinall
Craig, Norman (Kent, Thanet) Lockwood, Rt. Hon. Lt.-Colonel A. R. Touche, George Alexander
Craik, Sir Henry Lowe, Sir F. W. (Birm., Edgbaston) Tryon, Captain George Clement
Croft, Henry Page Mackinder, H. J. Valentia, Viscount
Dalrymple, Viscount Macmaster, Donald Walker, Colonel William Hall
Dalziel, Davison (Brixton) Magnus, Sir Philip Warde, Colonel C. E. (Kent, Mid)
Denniss, E. R. B. Malcolm, Ian Weigall, Captain A. G.
Dickson, Rt. Hon. C. Scott Mallaby-Deeley, Harry Weston, Colonel J. W.
Duke, Henry Edward Markham, Sir Arthur Basil Wheler, Granville C. H.
Duncannon, Viscount Mason, James F. (Windsor) Williams, Colonel R. (Dorset, W.)
Du Pre, W. Baring Meysey-Thompson, E. C. Wills, Sir Gilbert
Eyres-Monsell, Bolton M. Mildmay, Francis Bingham Wilson, A. Stanley (Yorks, E.R.)
Faber, George D. (Clapham) Mills, Hon. Charles Thomas Wilson, Captain Leslie O.(Reading)
Falle, Bertram Godfray Morrison-Bell, Copt. E. F. (Ashburton) Wood, John (Stalybridge)
Fell, Arthur Morrison-Bell, Major A. C. (Honiton) Wertley, Rt. Hon. C. B. Stuart-
Finlay, Rt. Hon. Sir Robert Mount, William Arthur Yate, Colonel C. E.
Fisher, Rt. Hon. W. Hayes Neville, Reginald J. N. Younger, Sir George
Fitzroy, Hon. Edward A. Newdegate, F. A.
Foster, Philip Staveley Newman, John R. P. TELLERS FOR THE NOES.—Sir
Ganzoni, Francis John C. Newton, Harry Kottingham F. Banbury and Mr. E. Wood.
Gardner, Ernest

Question put, and agreed to.

The CHAIRMAN then proceeded successively to put forthwith the Question on any Amendments moved by the Government, of which notice had been given, and the Questions necessary to dispose of the business to be concluded at Eleven of the clock at this day's sitting.

Government Amendments made: In paragraph (2) leave out the words "who is not a British subject, nor in the case of a person."

In the same paragraph leave out the words "being a British subject he is ordinarily resident in a British possession," and insert instead thereof the words "he is not domiciled in the United Kingdom."

Question put, "That the Clause, as amended, stand part of the Bill."

Mr. William Jones and Mr. Webb were appointed Tellers for the Ayes; but, no Members being willing to act as Teller for the Noes, the Chairman declared that the Ayes had it.