CLAUSE 27.—(Exemption of Interest under War savings Certificates from Income Tax.) (Hansard, 21 June 1916)

§ Mr. MONTAGU
I beg to move, to leave out the words "if he makes a declaration that his total income from all sources does j not exceed three hundred pounds a year."

§ Sir F. BANBURY
I should like some: explanation of what this means. As far as I can understand, it means that persons who invest in war savings certificates will be exempted entirely from Income Tax. Why has this particular form of Government security been singled out for this exemption? What amount will be authorised under the Regulations made by the Treasury? This will reduce the amount I that will be received from Income Tax. I do not say that it is not right, but it is a very startling innovation as to which we should have some explanation. We should also have some indication as to what the amount authorised by the Treasury will be, and why this particular form of investment has been selected.

§ Mr. MONTAGU
This is a peculiar form of security in that there is no interest payable upon it to the holder except compound interest which accumulates at the end of five years. The security is devised to meet the appetite of the working classes, who want a simple security the yield from which they can understand, who would find it very difficult to realise five years hence that any deductions should be made for Income Tax on the difference between 15s. 6d. and the £. Therefore we devised a plan whereby we 282 should get a declaration from the person buying the security that his income did not exceed £300 a year, and that on that declaration we should exempt the security from taxation. This has not worked well for this reason. We are very anxious to attract these people, but it is difficult to make them understand the reason for filling in forms subjecting them to all sorts of penalties if their income is over £300 a year. This excludes a large number of the very men we are wanting to attract—men who are earning £7, £8, or £9 a week, and who could not sign the declaration. Therefore, as we had to ask Parliament to relieve Income Tax in cases up to £300, we have now made this alteration in the regulations limiting the amount held by any one person up to 500 certificates.