§ (1) The Commissioners of Inland Revenue may treat any sums actually paid in respect of munitions Exchequer payments, which appear to the Commissioners to be attributable to the same period and subject matter as that for which Excess Profits Duty is to be paid, as a payment on account of Excess Profits Duty, or, if the amount of the munitions Exchequer payments is larger than the amount pay- 636 able as Excess Profits Duty, as extinguishing the duty for the purposes of collection; and may arrange with the Minister of Munitions if in any case Excess Profits Duty is paid before the munitions Exchequer payment for the deduction of Excess Profits Duty payments from any sums to be collected in respect of munitions Exchequer payments, which appear to the Commissioners to be attributable to the same period and subject matter as that for which the Excess Profits Duty payments have been made, or, if the amount of the Excess Profits Duty payments is greater than the amount to be collected on account of munitions Exchequer payments, for the extinction of the amount to be so collected.
§ For the purpose of determining the period to which any profits are to be attributed under this Section, profits shall be deemed to accrue from day to day at a uniform rate.
§ (2) Any Excess Profits Duty and any munitions Exchequer payments which are remitted under this Section for the purpose of collection shall not be deemed to have been paid for the purposes of Section thirty-five of the principal Act (which relates to computation of profits and gains in relation to Excess Profits Duty) as extended by this Act.
§ (3) Deductions shall not be allowed on account of munitions Exchequer payments in computing profits for the purpose of Excess Profits Duty.
Mr. CECILI beg to move, at the beginning of the Clause, to insert the words, "(1) Notwithstanding any Act of Parliament to the contrary, the entire reponsibility and final decision in all matters relating both to Excess Profits Duty and munitions Exchequer payments shall rest with the Treasury and not with the Minister of Munitions; and there shall be no dual assessment in respect of such Excess Profits Duty and munitions Exchequer payments."
As the Bill stands there are two taxing authorities, which must lead to overlap ping. Surely there ought to be only one administration and collection. My Amendment lays down that there shall be no dual assessment in respect of excess profits; in other words, that there shall not be two bases of assessment for these two imposts.
§ The CHAIRMANIf the hon. Member's Amendment goes so far as that it is traversing the same ground that we had 637 on Thursday. I thought the hon. Member's proposal included only the small point of making the Treasury the final arbiter. I think the hon. Member was not in the House on Thursday, when we had a long Debate on the general question.
Mr. CECILI will confine myself to the earlier part of my Amendment, and I think that will come entirely within your ruling. To return to what I was saying. It does not seem wise or desirable that there should be two taxing authorities, for it does not tend to economical or simple administration. It cannot be economical from a purely departmental view that you should have these two taxing authorities and two sets of Government clerks employed on what should be done by the Treasury clerks alone. I am sure I may appeal more personally to the Chancellor, because he and I have worked, I am sure I may, say very amicably, on the Retrenchment Committee. That Committee in commenting on the Treasury and spending Departments went further and said the Treasury had a "very important duty to secure public economy and financial regularity." I submit that the present administration of these two taxes neither works for public economy nor is it a matter of financial regularity. If we are to attain those very desirable objects, in which it is always the duty of the Government to show a good example, it seems to me that the Munitions Act ought to be amended so as to bring the whole of these considerations under the control of the Treasury, and we should then obtain that financial regularity of which I speak, and also secure to the public the benefit of economical machinery in administration.
§ Mr. McKENNAI observe that this Amendment is not only down in the name of the hon. Member, but also, though perhaps not precisely in the same form, in the name of the hon. Member for the Everton Division of Liverpool (Sir J. Har-mood-Banner) and other hon. Members who have taken an active part in the Debate of to-day and Thursday. I recognise the hardship involved on firms in having to make separate accounts, perhaps for different purposes, made up in different ways. All must recognise that hardship, but as I have said in Debate, and I must repeat now, that hardship does not arise from this Act, it arises from the Munitions Act. Now it is suggested that we should have an Amendment to this Act which would do away in effect with the munitions 638 levy, and replace it by the Excess Profits Duty on the scale of 60 per cent, of the excess profits. It is very difficult for me in the absence of my right hon. Friend the Minister of Munitions—
§ Sir G. YOUNGERHe ought to be here.
§ Mr. McKENNATo defend his case, but I am bound to say this, that on the principle of taking excess profits, whether as munitions levy—that is to say the excess over the datum line, or by way of Excess Profits Duty, that he was first in the field in adopting that principle by Act of Parliament. I could not admit that he was first in the field in making public announcement with regard to it, but so far as the Act itself is concerned, in embodying the principle in an Act of Parliament, he was first in the field. I am quite sure that he would feel it a little hard that his work should now be unceremoniously thrust on one side, and that we should have to substitute for it the work of the Treasury. Something was said by the hon. Member for Sheffield that he hoped that this subject would not be considered as finally disposed of by to-day's vote. I should be only too glad if some arrangement could be made which would relieve firms of the great difficulties they are placed in with regard to dual accounting. On the other hand, it would be under any circumstances quite impossible for the Ministry of Munitions to accept the Amendment which is now before us, or the somewhat less drastic Amendment in the name of the hon. Member for Liverpool to which I have already referred. The munitions levy in many respects would have to be retained in the interests of the controlled firms themselves. They have entered into certain arrangements as in the case of certain firms mentioned to-day by my hon Friend who pointed out that various arrangements had been made with the employers in response to which they had invested money in the business.
§ Sir G. YOUNGERThe right hon. Gentleman has already told the Committee that he will respect those arrangements.
§ Mr. McKENNAThe munitions levy must remain, for they alone know what the arrangements are. I do not know what they are. [An HON. MEMBER: "NO one does!"] The Munitions Department know. Consequently, assuming even that the principle were accepted for many purposes the financial powers of the Munitions Department would have to con- 639 tinue. But subject to that, for my part, I should be perfectly willing that an arrangement should be come to, and to enter into an arrangement, and provided that the principle of uniform and certain taxation is retained I can assure hon. Gentlemen I have no desire to increase by one iota the already overwhelming task which has been imposed upon munition firms.
§ Sir J. HARMOOD-BANNERI do not think that controlled establishments would like to be put under the Treasury entirely a great many conditions have to be considered. With regard to my Amendment to which the right hon. Gentleman has referred, after the discussion I do not think he is likely to accept it, and so I do not propose to move it. As regards the matter of accounting, I hope he will consider it, but I would not like him to take it too seriously, because I have managed very well with matters as they at present stand, and I think a great many others do the same thing.
Mr. CECILAs the right hon. Gentleman is disposed to give further consideration to this matter, I would ask' leave to withdraw the Amendment. I do not know whether he will attempt to amend the Munitions Act.
§ Mr. McKENNAindicated dissent.
Mr. DENNISSThe difficulty is that the Minister of Munitions has discretion as to the datum line and as to the amount to be paid, and that could not be exercised by the Treasury, who do not know the facts.
§ Amendment, by leave, withdrawn.
§ Mr. JOYNSON-HICKSI beg to move, in Sub-section (1), to leave out the word" may "["Inland Revenue may "], and to insert instead thereof the word "shall."
I believe in practice it has been held that "may" in this case means "shall," but I think it is better to insert the word "shall," and that it should be obligatory on the Treasury to do what is here set forth.
§ Mr. McKENNAI do not think this Amendment is necessary, because it has already been decided that "may" in these circumstances means "shall."
§ Mr. JOYNSON-HICKSI understood that it had been previously held in that case. If the Chancellor of the Exchequer accepts it here, I beg leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ Sir J. HARMOOD-BANNERI beg to move, at the end of Sub-section (1). to insert the words,
If any taxpayer is dissatisfied with the decision of the Commissioners on any matter arising under this Sub-section, he may require the Commissioners to refer the case to a Board of Referees to be appointed for the purposes of this Part of this Act by the Treasury, and that Board shall consider any case so referred and have the same powers with respect thereto as the Commissioners have.A good many parties interested in this matter consider that there ought to" be a right of appeal.
§ Mr. McKENNAI do not think that my hon. Friend, if he recalls the purpose for which the Board of Referees was appointed, will consider it right that an appeal on the matter referred to here should go to that Board. It is entirely foreign to the scope of their work.
§ Sir G. YOUNGERYou do not require permission to appeal to the Board of Referees. It is an absolute right.
§ Mr. McKENNAThere is an absolute right on the matters referred to them. The main function of the Board of Referees is to determine what is the proper percentage to be allowed upon capital. There are a number of other matters which are referred to them in the principal Act, but that is the main function. It would be quite foreign to let any individual question of this kind go before them.
§ Sir C. CORYWould not the question of depreciation arise in this case? Where a man had spent a large amount on munitions plant, if he was not satisfied in regard to the Excess Profits Duty, would he not have a right of appeal on that point?
Mr. DENNISSPersonally, I do not think that the Board of Referees is the proper tribunal at all. If, however, there is no appeal to the Board, my hon. Friend would like to have one to the High Court. Perhaps the Chancellor of the Exchequer 641 will consider whether it is not right that a matter of this importance should be settled by judges and not by the Board of Referees.
§ Mr. McKENNAI think there is a misunderstanding. There could not be a case for appeal here. All that the Clause says is that if an amount is to be paid by way of munitions levy, that amount is to be accepted pro tanto for the purposes of Excess Profits Duty. There is no possible point of appeal, unless it is to be assumed that the Inland Revenue Commissioners are unable to read, write, add, or subtract. There is no question of law or of fact.
§ Mr. McKENNAIf they acted improperly I imagine it would be brought very promptly to the notice of the House.
§ Amendment, by leave, withdrawn.
§ Sir J. HARMOOD-BANNERI beg to move, at the end of Sub-section (1), to insert the words— "
"(2) Notwithstanding anything in the principal Act any allowances agreed to between the owners of a controlled establishment and the Minister of Munitions or awarded by a referee appointed by him on account of—
in order to determine the net profits oh which munition Exchequer payments are payable shall, on the application of such owners be also allowed by the Commissioners of Inland Revenue in order to determine the net profits on which Excess Profits Duty is payable, due adjustment being made in respect of any difference in the respective accounting periods."
- (a) Exceptional wear and tear of plant, buildings, and machinery;
- (b) Capital expenditure specially incurred for the purposes of munitions work;
- (c) The probable value to the controlled owner at the end of the period of control of any plant, buildings, or machinery erected or installed, or other expenditure incurred for munitions work since the fourth day of August, nineteen hundred and fourteen;
- (d) Special provisions or terms of any contracts entered into between the Government and the controlled owner;
- (e) Any exceptional services rendered by the controlled owner in connection with the controlled establishment;
- (f) Any increase in salaries or other emoluments of any persons engaged in the management or direction of the controlled establishment made since the end of the standard period,
642 or any steps taken since the end of that period which might operate to decrease net profits; - (g) Any other matter which may appear to the Minister, or to the referee, as the case may be, material to be taken into account;
The Chancellor of the Exchequer gave us a full explanation of what he is going to allow. I do not know how far he is going to deal with some of the smaller matters. I would like to know whether what he has stated is contained in any Amendment on the Paper, so that we may check it. In any case I move this Amendment for the purpose of obtaining information.
§ Mr. McKENNAWhat we have agreed is to take the sums found by the Ministry of Munitions in respect of subheads (a) and (c) in the Amendment.
§ Sir J. HARMOOD-BANNERNot (b)?
§ Mr. McKENNA(b) appears to be involved in (a) and (c). I am not quite sure that I am right.
§ Mr. JOYNSON-HICKSIt has nothing to do with (a).
§ Mr. McKENNAI am not sure. Capital expenditure is to be written down, I assume. The principle is quite clear.. Where new capital is put into works for the production of munitions, the Ministry of Munitions will be the authorty to determine the rate at which capital is to be written down in order to bring it to the value at which it will stand at post-war rates. It appears to me that that general principle covers (a), (b), and (c). As regards (d) to (g), they are not matters of which we take account. I do not see how we could. They have all an uncertain or discretionary element, which could hardly be accepted in the case of a tax. It may very properly be accepted where profits are limited in consequence of a bargain, but when we have to have a tax of general application covering thousands of firms it is impossible to put a value on any exceptional services rendered by the controlled 643 owner in connection with the controlled establishment. It may be much; it may be little. It may mean all the profits earned, or it may mean nothing. In (g) we have, "Any other matter which may appear to the Minister, or to the Referee, as the case may be, material to be taken into account." These, again, are words of which the interpretation can hardly be given in any levying of a new tax. The main substantial points are those contained in (a) and (c), and, as I have stated, we have agreed to accept the sums found under the Munitions Rules as the sums to be taken by us.
§ Sir J. HARMOOD-BANNERWhat about (d)—"Special provisions or terms of any contracts entered into," etc.
§ Mr. McKENNAI have already said that any contracts entered into between the Ministry and a contractor will, of course, be honoured by the Treasury. I am, however, not quite sure that I understand what paragraph (d) may mean.
§ Sir J. HARMOOD-BANNERWe take it to mean—it might mean !—a special provision whereby a firm having spent £50,000 will have allowance made to it for any sum between that amount and the amount of depreciation. We do not want to have this matter apparently settled and then to find that we have not got all that we wanted.
§ Mr. McKENNAThe example my hon. Friend has given me is one, clearly, which is included. Where £50,000 have been put into a business in the shape of new plant bought at the high prices of the War for a purpose which may be mainly useful in the War, and in view of the fact that that plant after the War, instead of being worth £50,000 may be only worth £10,000, it is quite obvious that the owner of the controlled establishment or firm must be compensated for that loss of capital. There is no misunderstanding between the Munitions Department and ourselves upon that subject. It must be understood that we do not propose to adopt the rules of the Ministry of Munitions. What we propose to do is to accept their finding as to the amount of exceptional wear and tear for plant, building, machinery, and as to the probable value to the controlled owner at the end of the period.
§ Sir G. YOUNGERAnd obsolescence as well?
§ Mr. McKENNAI think in our rules obsolescence is the same as the others.
§ Mr. JOYNSON-HICKSPerhaps this will be a convenient opportunity to speak. I have a little later another Amendment, which takes in all that this Amendment does, and also all that is under Rules 9 and 10 of the Munitions Rules. If I speak now I can then move my Amendment pro forma. I do not know whether the right hon. Gentleman is going to put a new Clause down to include all this, but we should like to see the exact wording of the concession he is going to make a very large number of controlled establishments have put their case before me in regard to this very Clause. There are many controlled establishments which really have no prewar standard of profit at all. I believe the right hon. Gentleman has had a request to receive a deputation from the Society of Aircraft Constructors, though, perhaps, being busy, it may have passed him. There is a very important branch of munitions work now being carried out by the aircraft industry, and they look forward to the acceptance of this Amendment, or perhaps large concessions, made by the right hon. Gentleman. I do not at this period of the evening want to go into the general position of aircraft manufacturers, but everybody knows that up to the period of the War they made no profits at all. I suppose there is not a single aircraft firm that has any standard of pre-war profits. The 6 per cent, declared was no profit at all. It appeared to them, therefore, that they were likely to get a return in respect of the enormous amount of expenditure and loss in the experiments they had made in the previous five or six years when the aircraft became a possibility in regard to the War. It does appear that the Ministry of Munitions have come to certain arrangements which were included in these Rules 9 and 10. I do not think anything could be fairer than that the right hon. Gentleman should insert in his Bill some such provisions as are contained in those rules. Otherwise inevitably there will be two clashing series of accounts—a matter discussed earlier in the afternoon, and to which I will not further allude.
Certainly, however, in relation to this question of capital expenditure, I venture to suggest that it is absolutely essential in regard to that particular class of controlled establishment to which I have referred. One knows that many aircraft constructors who, before the War, only 645 received orders for five or six machines at a time, immediately the War began were asked by the Government to make machines in hundreds. They are now turning out hundreds of machines where they were turning out five or six. To do that the whole of the profits which they are making are going back into the business in the form of sheds, buildings, and plant, and these sheds, buildings, and plant are going to be of no possible use to them after the War is over. I know there are some people who think that after the War aircraft will in a short time be used for all sorts of commercial purposes. I am not of that opinion. Personally, I am not in any way financially interested in aircraft, but these men have asked that their side of the case should be put before the Chancellor of the Exchequer. They are exceedingly concerned at the position. They are pouring money into the businesses, and unless they are entitled to have against this particular tax—if I may use the expression—the whole allowance which the Ministry of Munitions is going to give them in regard to the munitions levy, they will be very severely hit. They are a class of people who are so essential to the progress of the War that I do not think really the Chancellor of the Exchquer would wish them to be hit at the present time. I venture, therefore, to ask him— if he cannot come to a decision at the moment, which, perhaps, he cannot—that between now and the time he puts the actual wording of his concession in concrete form—for I am assuming that he is going to do so—he will consider very carefully the conditions of this particular industry, and see whether he cannot, not merely give them depreciation, but the capital expenditure absolutely, because it is used for no other purpose than that of the War, and it will be absolutely useless as soon as the War is over. I would also ask for Munitions Rule 10.
§ Sir GEORGE TOULMINHow is the right hon. Gentleman the Chancellor of the Exchequer going to accept the finding of the Munitions Department? Is it to be a purely administrative Act, or will another Clause have to be put down on the Paper?
§ Mr. McKENNANo, Sir; under the original Act, Section 40, Sub-section (3), the Commissioners of Inland Revenue have power to make regulations regarding a series of matters. These matters 646 include the subject-matters of paragraph (a) and (c). Consequently we do not require any new Clause to give us the necessary power. We can, administratively, under Section 40 of the original Act, do what I have described, namely, accept the findings of the Ministry of Munitions in regard to these matters. I quite appreciate the force of what the hon. Gentleman who spoke last from the other side said, but I am sure he will agree with me that we have gone a very long way in meeting his arguments. Of course, it must not be overlooked that that which is perfectly proper in the case of the munitions levy would be quite out of place in administering the Excess Profits Tax. For instance, take the power of the Minister to add to the 20 per cent, margin of profit such amount as he thinks proper as a compensation for additional output. If there were no such power of adding to the amount allowed the controlled firm under the munitions levy there obviously would be no inducement to a firm to increase its output so long as it earned its maximum profit. The principle of maximum profit puts an end to all the ordinary stimulus in increasing output, and therefore a regulation of that kind in the munitions levy is not only perfectly proper but it is even necessary. When you get to the Excess Profits Duty there is no such need. There is the stimulus to additional output. The firm retains 40 per cent, of all excess profits.
§ Mr. McKENNAWhy does it not?
§ Mr. McKENNAIn some cases it may not. But, really, I have endeavoured to argue this case now for two whole days, and the hon. Gentleman still makes the same interruption.
§ Mr. McKENNAOf course there are some it does not apply to, but it does to others, and I think the great majority. Therefore, it would not do for us in dealing with the Excess Profits Duty to accept the regulations which are quite appropriate to the munitions levy. That is one reason why it is quite out of the question to accept the Amendments as they stand on the Paper. I have given public assurances 647 to the Committee as to what we propose to do. I have power to give effect to those assurances under Section 40 of the original Act, and I hope with those assurances the Committee will now allow me to proceed with the other Sections of the Bill.
§ Mr. JOYNSON-HICKSWill the right hon. Gentleman give any idea as to when he will make the regulations, and whether we shall be able to see them? This is an important point. He has had his way all along the line, but really this is an Amendment of great importance, and all we get is the suggestion that at a future time regulations will be made by the Treasury. This House ought to have a deciding hand on this point, because regulations may be framed and we have no control over them. We have no possibility of criticising them effectively, and these manufacturers come to the House and ask for certain protection which they cannot get from regulations made by the Treasury. If the right hon. Gentleman can tell us that, either the regulations or a draft of them, can be submitted to the House before the Report stage of this Bill, that at all events will give us an opportunity of raising this Amendment again, and, if need be, of pressing the matter to a Division, which of course I do not intend to do to-night.
§ Mr. McKENNAIf I used the phrase, "Regulations to be made by the Treasury," in general terms, I see on reference to the Act I accepted the provision in the Act itself. There would be regulations required to meet certain cases. For instance, I think the subject of goodwill could only be met by a regulation made by the Treasury, but the other matters do not require regulations at all. The words of Sub-section (3) are as follows:
"Where it appears to the Commissioners of Inland Revenue, on the application of a taxpayer in any particular case, that any provision of the Fourth Schedule to this Act should be modified in his case, owing to a change in the constitution of a partnership, or to the postponement or suspension, as a consequence of the present War, of renewals or repairs, or to exceptional depreciation or obsolescence of assets employed in the trade or business due to the present war, or to the necessity in connection with the present War of provid- 648 ing a plant which will not be wanted for the purposes of the trade or business after the termination of the Wary or to any other special circumstances specified in regulations made by the Treasury, those Commissioners shall have power to allow such modifications of any of the provisions of that Schedule as they think necessary in order to meet the particular case."
Therefore, the Act has given the Commissioners of Inland Revenue the power necessary to enable them to accept the findings of the Minister of Munitions as regards (a) and (c), and the Inland Revenue Commissioners will accept those findings. There is nothing more I can say to the Committee than that fact.
§ Mr. JOYNSON-HICKSThe right hon. Gentleman says they will accept them. There is no order that they shall. The right hon. Gentleman may disappear, and the Commissioners of Inland Revenue may say, "We do not agree, and we are not going to be bound by the Minister of Munitions. There is no regulation to make us." Merely for the Chancellor of the Exchequer to say they would accept is—forgive me for saying so—not very binding on anyone. I do not want to use the term "slip-shod," but there is no binding contract by which any manufacturer can say to the Commissioners of Inland Revenue, "The Minister of Munitions has done so-and-so, and made us certain allowances, and now you have to make us certain allowances with regard to this Excess Profits Tax."
§ Mr. McKENNAThe hon. Member is really not doing justice to the case. Parliament has given the Commissioners of Inland Revenue authority to allow such modifications of any of the provisions of the Schedule—that is the Schedule referring to these allowances—as they consider necessary in order to meet a particular case a Parliamentary pledge is made that that power will be exercised in a certain way. Parliament has given them the power already. I do not see what more Parliament can do. Does the hon. Gentleman suggest that there should be a new Clause to say they should exercise that power in that way? I think it is quite understood, and I think it would be most undesirable. Parliament may wish to reconsider the matter, but until Parliament does reconsider the matter it will be administered in the way I have described.
§ Sir G. TOULMINI am not doubtful as to the Chancellor of the Exchequer and his Department carrying out the pledges he has made, but I am a little doubtful whether he has gone quite as far as to satisfy those in a difficult position at the present moment. I refer to the class of firm entering on rather speculative business such as making aeroplanes, and so on, and which has practically lost a great deal of its capital. Such a firm will be making what will be called, under the rules of the Excess Profits Tax, excess profits for a year or two. Then the end of the War comes, and they find, although they have been earning excess profits, a great deal of their capital has disappeared. If I understand the Chancellor of the Exchequer's pledges include an undertaking to take into consideration all matters connected with capital, such as those included in Rule 10 under the Ministry of Munitions, then, I think, that would go very far to satisfy opinion.
§ Sir J. HARMOOD-BANNERThere is an Amendment on the Paper in the name of the Chancellor of the Exchequer of Section 40 (3) of the principal Act. Does not that cover the matter we are dealing with, because there the referee is to be appointed by the Minister of Munitions, so that he would have the power to deal with that question? Otherwise, what is that Amendment for?
§ Mr. POLLOCKI would like to ask whether Regulations have been issued under the powers given in the last Act under the provision "or any other special circumstances specified in Regulations made by the Treasury"? I remember the Debate, after which the Chancellor of the Exchequer was good enough to put in those words contained in an Amendment which I moved, because it was indicated there would be certain special circumstances which ought to be dealt with by those Regulations. Now that Debate took place on the 4th November last, and the Chancellor agreed to the insertion of those words. He has relied on those words tonight, and I would like to know whether any Regulations have been issued under that proviso between the 4th November last and the present time. It appears to mo that in the pressure of work the Treasury have overlooked the importance of such special circumstances being regulated in the manner provided by those words, and they seem to have been somewhat lost sight of.
§ Mr. McKENNAI do not think the hon. and learned Gentleman has really done justice to himself. May I point out what occurred in the original discussion? On this bench we asserted that all the items we had named really covered the ground sufficiently, but my hon. and learned Friend opposite (Mr. Pollock) wished to have additional power and a larger power put into the Bill by way of a precautionary measure, and we afterwards accepted the words which gave us discretion, if anything new should turn up, to go outside the limit of the precise words to which we wish to confine the Clause. The prevision of my hon. and learned Friend has turned out to be amply justified, because when something quite new arises, as has been the case to-day, like the question of goodwill in the special case of controlled firms, it may be that they will have to be dealt with under the words which have just been quoted by my hon. and learned Friend. That we have not made Regulations up to now means that the particular words included in the Clause have dealt with all the circumstances which have arisen, and if any other special circumstances arise we shall have to make Regulations to deal with them.
§ Mr. JOYNSON-HICKSFrom what the right hon. Gentleman has just said it appears now that Regulations are not needed to carry out the pledge given by the Chancellor of the Exchequer. Here is a certain Act of Parliament, and there are certain directions as to what the Commissioners of Inland Revenue may do. This pledge is given, but it will merely be enshrined in the volumes of the OFFICIAL REPORT, and probably will not be reported in public, and controlled firms will not know what has occurred unless they go to the OFFICIAL REPORT. No Regulations are to be issued, but the Chancellor of the Exchequer has simply given a pledge that controlled firms shall have certain rights when they go to the Commissioners. The knowledge of that pledge will be found nowhere but in the pages of the OFFICIAL REPORT. If the right hon. Gentleman would issue Regulations they would be part of the machinery of the Act, and all controlled firms would have a knowledge of them, and then they would be able to say, "We are entitled to so-and-so." But they will hear nothing about this pledge, and the right hon. Gentleman ought to issue some public Regulation or a circular from the Treasury to the controlled firms informing them of 651 this concession. Otherwise how are they to know? They do not read my speeches, and at this period of the evening speeches will not be reported in full in the newspapers, and I doubt whether they will have the benefit of seeing my right hon. Friend's speech in the papers.
§ Mr. McKENNAI really think the hon. Member is over anxious on this point. There is not a controlled firm in the country that is not watching this question with the greatest interest. All the controlled firms will have to go to the Minister of Munitions to determine what they are to be allowed for wear and tear, and when they have got their allowance I am quite sure every one of them will believe that that allowance will be accepted by the Commissioners of Inland Revenue in regard to the Excess Profits Duty, and there will not be a firm in the country that will not know this.
§ 9.0 P.M.
§ Mr. HEWINSI really think we ought to go further than that. I rather suspect the reason why the Chancellor of the Exchequer cannot be more definite is that he has experienced a great deal of difficulty in interpreting the Rules already made. With all these complicated Regulations, does the right hon. Gentleman suspect that his Excess Profits Tax will not yield him all the results he anticipates, and is he afraid that this is going to be a case of the Land Tax over again? If the Chancellor of the Exchequer is prepared to make concessions, surely it is most important for him to be precise and definite, if not absolute. There are thousands of firms who want to know all about these things.
§ Sir J. HARMOOD-BANNERI ask leave to withdraw my Amendment.
§ Amendment, by leave, withdrawn.
§ Motion made, and Question proposed, "That the Clause stand part of the Bill."
Mr. HENDERSONThe right hon. Gentleman has referred to depreciation. There are other things besides depreciation which the Minister of Munitions is bound to allow, such as an allowance for excess output. That point was referred to when the Act was passed by the right hon. Gentleman the Member for Walthamstow (Sir J. Simon). The Chancellor of the Exchequer has only referred to the case of depreciation. We want to know whether the Commissioners will give effect to these 652 allowances in the excess profits, the same as the Minister of Munitions will give effect to them in the munitions levy.
§ Mr. MONTAGUWe are now dealing with depreciation, and nothing more.
§ Sir G. TOULMINWill the right hon. Gentleman explain the third Sub-section of Clause 32, which provides that:
"(3) Deductions shall not be allowed on account of munitions Exchequer payments in computing profits for the purpose of Excess Profits Duty."
I rather understood the beginning of the Clause to suggest that they should be taken into consideration.
Mr. HENDERSONI think we are entitled to some sort of an explanation as to what this means. I do not know what it means. Payments on account of Excess Profits Duty are allowed to be deducted for the next year's assessment It may be that the Chancellor of the Exchequer will not allow payments on account of munitions, and, if so, it is most unfair. It should be the same for any payments on account of munitions.
§ Mr. MONTAGUIt follows exactly the provisions of Schedule 4, Part I., paragraph (4) of the principle Act, which, if my hon. Friend will look at it, he will find says:
"Deductions shall not be allowed on account of the liability to pay or the payment of Income Tax or Excess Profits Duty."
These words make exactly similar provisions in the case of Munitions Levy Tax. Clearly the rule which applies to Income Tax and Excess Profits Tax must also apply to Munitions Payments.
Mr. HENDERSON
But a deduction shall be allowed….for any sum which has been paid in respect of the profits-on account of any Excess Profits Duty or similar duty imposed in any country outside the United Kingdom.
§ Mr. POLLOCKSurely it is clear that the deduction is not to be allowed in respect of the Exchequer payments. It is allowed in the case of the Excess Profits Duty, but it is not allowed in respect of Exchequer payments on account of munitions. It just makes the difference, and it is really going back to the point we discussed last Thursday and also this afternoon. You are not treating payments 653 on account of munitions and Exchequer payments as payments which can be deducted in order to arrive at the Excess Profits Duty.
Mr. HENDERSONThe former part of this Section says that the munitions contribution or levy shall be accepted in payment of the Excess Profits Duty, or shall take its place if it is big enough. To the extent that it does take its place, it becomes Excess Profits Duty and is entitled to be deducted in the next accounting period as if it were Excess Profits Duty. If it takes the place of Excess Profits Duty it ought to have its advantages.
§ Mr. MONTAGUI am obliged to my hon. and learned Friend, but I think my hon. Friend is wrong. The charge for Excess Profits Duty is made on the gross profit before the payment of any Income Tax, and these would have been included in the original Act if the original Act had dealt with munitions.
§ Clause ordered to stand part of the Bill.