§ (1) Where any securities have been issued in connection with any Government loan raised for the purposes of the present War, and such securities were issued subject to the condition that the interest thereon should be exempt from assessment to Income Tax, but should not be exempt from Super-tax, the interest on the securities shall be exempt from assessment to Income Tax, but shall not be exempt from Super-tax.
§ (2) The interest on any such securities shall, for the purposes of Super-tax and for the purposes of any relief from Income Tax which depends on the total income from all sources, be treated as part of the total income from all sources as if the amount actually received represented net income after deduction of Income Tax at the highest current rate; but nothing in this provision shall be construed as entitling any person to the repayment of any sum on account of Income Tax on the ground that he is to be treated as having paid Income Tax at such rate as aforesaid on the interest so exempt.
§ Mr. FELL.I beg to move to leave out Sub-section (2).
I should like to know what this Clause really means? If it really means the obvious, it is straining the thing against the investor in a way which I do not think it was intended when the loan was issued. As I read it the intention is that he must really say, "I have an income of so much in this Loan which was free of Income Tax, but I must add 25 per cent, to it, and then put that in my Super-tax returns." I do not know whether I am right in my construction, but I cannot read it in any other way. I should be very glad to hear what the meaning is.
Mr. HENDERSONI have an Amendment down to leave out all the words 876 after the word "rate." I submit that the first part of this Sub-section is inconsistent with the latter part. Any man who invested in the 4 per cent. Loan did so under the terms of that Loan that he was free from Income Tax. Supposing he was only paying 2s. 6d. Income Tax for a small income, by going into the 4 per cent. Loan, according to this Clause, he has no right to claim that 2s. 6d. back. The intention was that the 5 per cent. Loan was issued at such a price that made it 5£ per cent. This assumes that everyone who invested in that Loan was subject to a 5s. tax. Well, that was not so because of the graduated scale. Everyone knows that if you receive a dividend from any company free of Income Tax, and your Income Tax is less than 5s., you are entitled to recover from the Income Tax Commissioners just the same as if the dividend had been issued for the full amount with the tax on. That has been established long ago. Now, it does seem inconsistent that you are going to say to a man, as I read this Clause, "Although we have only paid you 4 per cent, interest, and for the purpose of Income Tax we ask nothing, for the purpose of Super-tax we are going to treat it the same as if you received 5 per cent." That will not do. You cannot have it both ways. In any case, I submit very strongly that the purpose of the 4 per cent. Loan was to treat the man precisely in the same way as if he had subscribed to the 5 per cent. Loan, inasmuch as he would be saved the trouble of a deduction of the tax. But if he has an income on which ho is subject to a tax of only 2s. 6d. or 3s., then you are mulcting this man of his rights to claim the difference between that and 5s. I submit that you cannot do that. It is not fair to the man. If he had been told that, no one with an income subject to a tax of 2s. 6d. would ever have thought of taking this 4 per cent. But, according to this Clause, he is denied his right to recover the difference between what his proper tax is according to the scale; and the 5s. mulcted from him by the deduction from the 4 per cent. Loan.
§ Sir W. BEALEI would like to ask simply a question for information, because I have been asked to explain what would be the effect of this I have no doubt myself that it means that a person receiving the 4 per cent, is, for the purposes of this tax, to be treated as if he had received 55. I understand that is what the 877 hon. Member wants to avoid. I do not support the Amendment; I am quite willing it should be treated in that way, but as the words of the Sub-section are not quite clear to the ordinary man, I want to know whether I am justified in giving that concrete instance of its meaning.
§ Mr. BONAR LAWI do not quite understand the point of my hon. Friend's Amendment. After all, nobody is entitled to say that if subscribers to the 4 per cent. Loan are treated in the way that was clearly set out in the prospectus there is any hardship.
§ Mr. BONAR LAWI remember quite well that when we were going through this suggested loan we wished to make it plain without the possibility of misunderstanding, that the man who was getting four per cent, was in no respect getting any advantage over the man who has to pay his tax, and here are the actual words of the statement:
For the purpose of Super-tax, and in computing total income for the purpose of exemption and abatement, the income derived from such interest will be treated as if the amount received represented the net income after the deduction of the Income Tax at the full rate.That is to say, in asking people to subscribe to the Four per Cent. Loan, we told them they would have no Income Tax to pay, but, as regards Super-tax and as regards abatement, they would be in precisely the same position as if paying Income Tax on the Five per Cent. Loan.
Mr. HENDERSONNot in the same position, because the man paying an Income Tax of 2s. 6d. for the Five per Cent. loan can recover now by applying to the Inland Revenue Commissioners. The Five per Cent. Loan is in two forms. There is the registered stock, where the income is not deducted at the source, and there is the unregistered, where the Income Tax is deducted But if you take the 5s. in the £l, and the Income Tax Commissioners are shown that a man's income is not more than £l,000, he can get a proportion back.
§ Mr. BONAR LAWIt is obvious that if your income is only £l,000 you cannot be liable to Super-tax.
§ Mr. FELLI should like very carefully to consider the terms of the prospectus before I entirely agree that it is as stated, 878 but I must accept it for the time being, and postpone the matter for the Report stage. I beg leave to withdraw. Amendment, by leave, withdrawn
§ Clause ordered to stand part of the Bill.
§ Clause 15 (Provisions as to Interest Payable without Deduction of Income Tax) ordered to stand part of the Bill.