§ Section 5 of the Finance Act, 1914 (which provides for the taxation of income in respect of foreign property), shall not apply to income arising from the sources specified in that Section of an assurance company so far as that income arises from the investments of the foreign life assurance fund of the company, but a corresponding reduction shall be made in the relief granted under this Act in respect of expenses of management.
§ Clause brought up, and read the first time.
§ The CHANCELLOR of the EXCHEQUER (Mr. McKenna)
I beg to move, "That the Clause be read a second time."
This is a Clause which gives relief to British life insurance companies which are carrying on business both at home and abroad. Under the Act of last year all the foreign investments of such a company were rendered liable to Income Tax even though the income was not brought home. Strong representations were made that the effect of that change of the law was very injurious to those companies, as in competition abroad with other companies not equally affected they would have to raise considerably the rates of premium. I was told, and I accept it as a fact, that companies would be face to face with one or other of two alternatives. Either they would have to give up their foreign business altogether because they could not compete with their foreign rivals, or else they would have to separate their foreign business entirely from their home business, with the result that we should not only lose the Income Tax from the foreign business, but also the control of the whole capital engaged both at home and abroad. In these circumstances we have thought the best course to adopt was, at any rate as a temporary measure, to meet the difficulties of these companies on the footing 1661 of the relief which they themselves stated as necessary, and to leave the subject for further investigation and examination by the Committee which is inquiring into the whole of the Income Tax laws. I said our relief was on the footing of their requirements, but I should add by way of precaution, on the footing of their requirements as I understand them, in case it might be stated hereafter that we had not done everything which they asked. We allow a deduction from the expenses of management for the purposes of Income Tax, but it is quite clear that as they will not pay Income Tax under this exemption they ought not to be allowed the benefit of the further reduction in respect of a sum which they do not pay.
§ Mr. JAMES MASON
Will the amount of management expenses allowed for be in proportion to the English investments?
§ Mr. McKENNA
There will be separate accounts kept of the cost of management. They would know what their foreign management was. I do not think it would operate in proportion. Of course it must be clearly understood that any profit brought home will be charged Income Tax. It is only in respect of that profit and income which is not brought home that the relief is given.
§ Mr. T. M. HEALY
I wish to remind the right hon. Gentleman that by some means he has forgotten to put forward a number of other Amendments to which the late Chancellor of the Exchequer was committed. Last year they were embodied in a Bill which was read a second time. Although we are in the midst of a War a definite pledge was given by the Government when the House agreed to split the Finance Bill into two, and it was suggested that we should have a much larger opportunity for discussing Amendments on the second Bill than on the Bill immediately devoted to taxation. The Bill immediately devoted to taxation is that which received the Royal Assent last November. There were two matters on which the then Chancellor of the Exchequer last year yielded, and they were in the Government Bill of last year, but owing to the War and the general collapse these Amendments were dropped. I rise, not for the purpose of objecting in any way to this Clause, but to remind the Government that we expect a realisation of the promises which were then made. I would specially remind the right hon. Gentleman that one dealt with licences and the other dealt with the question of tenants' improvements 1662 in Ireland, which the Government agreed in certain circumstances to exempt, and brought in Clauses in their Bill which in consequence of the War were dropped. It must not be supposed that we shall allow them to be dropped altogether out of proposed legislation of this kind.
§ Mr. BRYCE
Has any estimate been made of the respective Amendments which are involved in the proposition which my right hon. Friend now makes, and the relief which has been granted under the Act? Will he tell us how these figures compare, because it is very difficult to arrive at an opinion in regard to the proposition unless we know that?
§ Mr. McKENNA
I have not the figures at my disposal, but if the concession is necessary on the grounds I have stated I do not think the amount will be a relevant point. If my argument is right, we should not only lose the amount of the concession, but we should also lose the control of the capital engaged in the business.
§ Mr. McKENNA
Inasmuch as we do not propose to charge Income Tax on the major sum, there is no ground for deducting from that major sum the amount relating to a further concession. We deduct the amount in the further concession because we charge Income Tax on the major sum, but inasmuch as we are not charging Income Tax on the major sum, there is no reason to make any deduction from it.
§ Mr. McKENNA
The hon. and learned Gentleman's first point, I think, relates to the 1912 Act. There is an Amendment on the Paper dealing with that, and I would rather wait till we get to it before I deal with the point. On the second point I have not acquainted myself with the subject, but I will make inquiries without delay.
§ Question put, and agreed to.
§ Clause added to the Bill.