§ The provisions of Section twenty-nine, Section thirty (as amended and extended by Section eleven of the Finance Act, 1917), and Section forty-three of the Finance Act, 1916, (which give relief from Income Tax in certain cases for the then current Income Tax year) shall have effect as if herein re-enacted and in terms made 1324 applicable to the Income Tax year beginning on the sixth day of April, nineteen hundred and eighteen.
§ Provided that the said Section thirty as so amended shall apply to any person who during. the current Income Tax year has served as a member of the Air Force, but a person shall not deemed to have served as a member of the Air Force unless he has served as an airman in Air Force service or as an officer of the Air Force on full pay or at a rate of pay which appears to the Income Tax Commissioners concerned, after consultation with the Air Council, to be equivalent to full pay, and either out of the British Islands or for at least one month continuously in the British Islands.
§ Brigadier-General CROFT
I beg to move, at the end of the Clause, to add the words:Provided also that the said Section forty-three shall have effect as if the words ' three-shillings and sixpence' were omitted and the words ' one shilling and sixpence ' were sub stituted there for.I think the House is so well informed with regard to what I call this scandal of a double Income Tax that I do not intend to speak for more than one or two minutes on this subject. I would like to inform hon. Members who have not followed the matter very carefully that this. is no longer a question affecting simply Australia and New Zealand, but it also affects those in South Africa and in Canada. The Chancellor of the Exchequer at the beginning of the War again and again pointed out that this matter was going to be adjusted by a conference of representatives from all parts of the Empire, and that conference was to be held immediately after the War. That was all very well for one year, and it was not such a great burden for two years, but as the War has gone on there is hardly a single hon. Member who does not now feel that the prolongation of this agony of confiscatory taxation has been really one we ought not to have permitted for our kinsmen in the Dominions over seas.
I am going to ask the Chancellor of the Exchequer to once more consider this question, and if I do not make a long speech it is because I want the Chancellor of the Exchequer to get some-dinner. He knows full well the justice of this case. We have his own words on many occasions in which he has told us that he admits this grievance, and I hope he will now make a clean cut on this question. We have put down the same Amendment as last year, because the position has not really altered. As a matter of fact. with regard to Dominion 1325 residents who are taxed in the Dominions, the general effect is that they are worse off this year than last year. I want to read a letter which I have received from a large Australian merchant, who writes as follows:I have to-day received an urgent request from my managing director in Australia for my company to put in an application for Australian War Loan, to which I regret I have had to reply in the negative, merely because the English taxation makes this impossible.This company is an Australian company, registered in New South Wales. All its assets are in Australia, the business is carried on in Australia, and all the profits are made there; yet on account of the control being in London, it is treated for the purpose of English Income Tax as if it were an English company, and it therefore pays English tax on its entire profits irrespective of the fact that a large proportion of them never come to this country, and never will. The bearing of this on investments in Australian War Loan is as follows:— The Australian Loan is issued at 4½per cent. free of Australian tax, and is therefore undoubtedly a favourable investment for companies situated in Australia as ours is situated, provided they are not subject to English tax. In our case, when this 4½per cent. was brought into our profit and loss account, we should pay English tax on the income from this Australian Loan, which would stay in Australia, thus making it appear obviously ' unfavourable compared with an English Loan realising 5¼per cent. interest. As a matter of fact, we, an Australian company, have invested large amounts in English War Loan, the interest on which, when transmitted to Australia is not subject to Australian Income Tax, as this part of income has been earned out side Australia. When, however, this Australian company properly desires to invest similarly in Australian War Loan, the English tax authorities make it impossible for it to do so.That is the whole point. The House is well aware of the arguments. I hope the right hon. Gentleman will remember that in the case of Australia and New-Zealand, at any rate, they do not collect Income Tax on money which has been earned in this country, yet where people from the Dominions are resident here and have their businesses in the Dominions we here charge the double duty upon them. If an Australian is resident in this country and he is a man of wealth he pays a tax of 10s. 2d. here in addition to one of 6s. 6d. in Australia. and he pays the latter purely and simply in order to provide the Austrialian Armies which are fighting for us in France. The same argument applies in a lesser degree to the other Dominions which I have mentioned. It has been admitted that this tax in unfair, and the Chancellor of the Exchequer has told us that the only possible reason for such a grave, and speaking disinterestedly as I do on this 1326 subject, such a wicked injustice continuing, is that this is not the time when he can afford to give up any Revenue which is coming in. It comes to this, that in order to get a certain amount—I do not know the exact figures, but I am told it represents about nine hours' cost of this War—we are placing this huge burden on our kinsmen with the inevitable result—and I know it has occurred in three cases recently—that Dominion citizens have had to go back to Australia because they cannot afford to remain here and pay these higher taxes. I submit that in this case the needs of the Mother Country ought not to be adduced as a reason why we should penalise the very men who are paying twice over for the Armies of the British Empire. Heaven knows, if we do not realise now what the Dominions have done for us, we never shall. Remember the original Expeditionary Force we sent out to France. It consisted of four divisions. But the Dominions before very long provided nearly 1,000,000 men to fight under the British Flag for the Sovereign who is collecting this tax. I hope most sincerely the Chancellor of the Exchequer will realise the desirability of granting this concession, and that at the end of four years we shall cease practically confiscating the incomes of those people whose only crime is that they have come here to this country to live among us, and in many cases, it may be, in order to be nearer their relatives who are fighting on our behalf. I hope the Chancellor of the Exchequer will see his way to make this concession.
§ Sir J. D. REES
My hon. and gallant Friend has been commendably brief. I will try to follow his example. Indeed, it is with some compunction that I rise at all to speak on this matter, not because I have not an exceedingly good case, but because of the fact that I have for some twelve years been chosen to make representations on this very question. A great many people from Australia are paying no less than 16s. 9d. in the£ Income Tax. That is a crushing burden, and I know various companies that are leaving this country, taking themselves away bag and baggage, because of that burden. This is a matter for serious consideration by the Chancellor of the Exchequer, especially bearing in mind the admirable service which has been done by the Colonies throughout this War. As regards the Indian side of the question, 1327 I confess that the Chancellor of the Exchequer has taken some wind out of my sails by announcing that the extra Is. will not be paid where the combined tax in any part of the Empire is as much as 6s., and then the tax will remain at 3s. 6d. in the £
It must not be supposed that this is a question which merely affects rich men. No man can long remain rich if he is called upon to pay 16s. 9d. in the £as Income Tax. But the Indian people affected are those who often really have no income out of which to pay this double Income Tax. Take the case of an Indian Civil servant who retires on a pension of £ l, 000. He has paid for £ 500 of that out of the Provident Fund. His income is really reduced when he gets home to £ 750. The only additional income he probably has may be some small investment in a tea garden in India. That man is exceedingly hard hit by this tax, and he is totally unable, I suggest, to pay such a heavy Income Tax. I know that the Chancellor of the Exchequer is acquainted with these cases inside and out. I understand his position is that, as far as he is concerned, he can not remit anything he has got hold of at the present time. Such a position is perfectly intelligible, and one can see that it is hard for the Chancellor of the Exchequer to let any money go at a time like this. I will not trouble the right hon. Gentleman, therefore, by repeating the arguments I have raised on many previous occasions. I will only beg of him, as soon as he possibly can, to remedy this injustice, and in the meantime, perhaps, he will consider whether, from a revenue point of view, he is not losing more than he is gaining by driving capital out of the Empire by the enforcement of this double Income Tax.
§ Mr. P. A. HARRIS
I do not think hon. Members who are pressing this matter are serving their cause well by moving an Amendment in this extreme form. The concession which has been made on two consecutive Budgets is a recognition of a sound principle on which the Government have agreed, and, as I understand it, they are prepared after the War to reconsider the whole problem from the Imperial point of view. Practically the whole of my income comes from the Colonies, and I should be both, as one deriving his income from Colonial sources, to feel that I was being placed in an exceptionally privileged 1328 position. The concession made this year is a very considerable one, because, although the Income Tax has been raised to 6s., the incomes derived from over sea sources are only to be called upon to pay the same tax as last year. I think that is a very generous proposal, and if it were to ' be suggested that in a time of war, when the needs of the Empire are so great and the necessities of the Exchequer so exceptional, special privileges should be given to Colonials, the result might be to weaken rather than to strengthen the Imperial bond, and it might cause hostility on the part of the working classes and amongst business men who derive their incomes from home sources. I think it is only fair that the Government and the English Treasury should get credit for what, all things considered, is a step in the right direction, and a step taken during the War. It is a generous step made more generous by that fact, and it should be recognised by those affected by it.
§ Mr. MACMASTER
I shall also endeavour to imitate the example of brevity which preceding speakers have set, and make my remarks as few as possible. With regard to taxation, I think the general underlying principle is that it should be fair and equal all round, but in the case of this double tax some incomes are made to pay twice over, often for the very same purpose. Take the present War. Australia and other Dominions are contributing of their money to carry on the War just the same as the United Kingdom. But incomes earned in Australia and New Zealand are made liable to Income Tax twice over when they are forwarded to this country, and that I submit is grossly unfair. With regard to the remedy, I am not hopeful that we shall get it at this moment, although I do not take that view for the reason which was advanced by the last speaker, the burden of whose song was that this was a time of emergency and difficulty, and those who received their incomes from abroad ought not to desire to be put in a privileged position by seeking exemption from the tax. Personally I do not take the view that they are asking to be put in a privileged position. Al they ask for is to be put in a position of equality with others. They want equality of position all round. What they contend is that the imposition of this double tax is nothing more or less than legalised robbery. I understand that the Chancellor of the Exchequer has got all the money he really wants this year, 1329 or is in the way to get it. It should be remembered that at the last Conference it was placed on record by the Government that this was a very unjust and unfair tax, and that being so, it does seem to me we are entitled to look forward to be relieved of it at the earliest possible moment. No doubt any Government that may be in power in this country when the War ends will take the proper steps to rectify this outrageous injustice. But I want to recall the attention of the Committee to the fact that a good deal of discussion took place at the Conference, and the resolution which was carried unanimously was to the effect that the present imposition of the double duty is unsatisfactory and that, at the conclusion of the War, immediate steps should be taken in order to rectify the injustice. I am pre pared to rely on that.
§ Mr. J. MASON
I have no personal experience of the effect of the double Income Tax within the Empire, and if I intervene for a moment it is because I feel that the continuation of a grievance of this kind—and I think it is very properly looked on by a great many people as an unjust arrangement—is a very serious matter, even in time of war. I cannot help feeling that, although the Chancellor of the Exchequer cannot go all the way, this question really ought not to be left very much longer. According to the figures, I am told that in Australia the State Tax and the Common wealth Tax added here amount in the maximum to 8s. 3d., and if you add on the English tax as it remains in this Budget, 3s. 6d., that makes 11s. 9d. without the Super-tax, which, of course, is a very severe burden compared with what we have to pay in this country. The point I want to make is that it seems to me the Australians' position is clearly worsened by the fact that they have a very heavy Excess Profits Tax as well, and the effect of the Excess Profits Tax, added to the Income Tax, is to make the position of these people almost impossible. I am told that the Excess Profits Tax in Australia is 75 per cent., so that out of a given private income in Australia 75per cent. is deducted, and then the other 25 per cent. has deducted from it here 80 per cent. for Excess Profits Tax, and the remainder is subject to this Income Tax. That seems to be a position so intolerable that it ought to be dealt with, and not left until after the War.
§ Sir C. KINLOCH-COOKE
I should like to support the Amendment, because I have taken an interest in this manner for many years, and because I think it is time something should be done to improve the position. I will ask the Chancellor of the Exchequer whether he cannot see his way to remit the tax in the case of persons whose money is earned in the Dominions, and whose profits are invested in the Dominions, in cases where no money whatever comes to the country. That is a very small matter. I have been into the case very carefully with those persons who have come over here, and who have asked me if I would make that suggestion to the Chancellor of the Exchequer. I do not think I am asking a very great thing. I also think that it is perfectly true, as many Members have said, that there are people who wish to stay in this country, but who have been obliged to go back to Australia and Canada owing to this question of double Income Tax. Another matter which has been pointed out to me on more than one occasion is that trade itself is leaving the Motherland for the same reason. I think that in these days, when we are called upon to do as much as we can to bring together the Dominions and the Motherland, that it is most unfortunate we should continue double Income Tax, which cannot do anything other than tend to separate the two.
§ Mr. BONAR LAW
All my hon. Friends who have spoken on this Amendment have been so brief that I feel the least I can do is to make a very short speech in reply, and I am sure they will not think that the brevity, of my remarks now is any indication that I do not realise the seriousness of this problem. Although my hon. and gallant Friend the Member for Christ-church (General Croft) is right in saying that I thoroughly sympathise with the purpose of this Amendment, it is not the fact that I should be ready to adopt an Amendment of this kind. I quite recognise that one of the greatest needs from a financial point of view, and one of the things at which we should aim most strongly, is that when the time comes for sending money abroad again every inducement should be given to investors in the Empire, so as to strengthen the Empire with the money that goes there rather than that it should go to foreign countries. That is one reason why I have always been in favour of doing something with regard to double Income Tax. There are two considerations, and 1331 they are the only two I am going to put before the Committee, which should make one hesitate on an Amendment of this kind. The first is that there is a great deal to be said from the point of view of an Australian who comes to reside in England and who has to pay not only on the money spent here but on the money made in Australia, and which never comes home to him at all. But there is another case where I am not at all sure the claim is equally good. Take any individual, myself or anyone else. An investment is held out to us in some Dominion. In deciding whether we will accept that offer we look in the main, if we are not influenced by patriotic considerations, to two things—the net return to us, and the safety of the investment we are making. As a matter of fact, in spite of the Income Tax in these Dominions, in many cases it is true, I am informed, that the actual return which I would receive, in spite of this double Income Tax, on money invested in the Colonies is higher than the return I would receive from money invested in this country at the present time. You have, therefore, to put that particular aspect of it out of your mind in discussing this question. In other words, you have to look at the big issue, which is strengthening the Empire by investing money in it. In looking at the unfairness of making an Australian who chooses to come to London and reside here pay inall eases full double Income Tax you must put that on one side, and you ought not to treat in the same way the individual who simply has an investment and sends his money to the Colonies. You have to consider, therefore, whether, taking all the facts into account, he gets a fair and reasonable return for his money in spite of the taxation to which he is subjected.
There is one other consideration, but one which is very important. I quite admit that this double Income Tax system ought not to continue an hour longer than the end of the War. We ought to put an end to it as soon as we possibly can; but I do not accept, and I am quite sure that the Dominion Prime Ministers would not accept, the principle of this Amendment as a right one. That principle is that in doing away with this double Income Tax the whole burden is to fall on the British Exchequer. I do not think that is right. It ought to be a question of 1332 adjustment, and the two countries should decide between themselves in what way the giving up of taxation is to be borne. I know, as a matter of fact, that that is the view taken by the Dominion Prime Ministers themselves. They feel it is a question for proper adjustment. It is. quite true, as my hon. and gallant Friend the Member for Christchurch said, that whether money is raised by an Income Tax in Australia or in Great Britain it is equally spent on the War. That is quite true, but we have to consider the burden that is laid on the different parts of the Empire as the result of the War. I would not yield to anyone in my admiration of what the Dominions have done, though what has been done by this country is worthy of admiration too. There is this difference: They are far away and we are the centre, and I feel the part they have taken in the War is such as would never have been anticipated. I recognise that fully, but you have to think of the position after the War. This War is laying on all belligerents a financial burden which is terrible in its intensity. I do not wish to exaggerate it. I never have—indeed, I have always felt that the want of money would never stop the War before we had achieved our object; but do not let us make any mistake. It is going to leave a very heavy burden, however it is adjusted, for many generations as a result of this War. I am, therefore, quite sure my hon. Friends will agree that from that point of view what you have to consider, treating the Empire as a whole, as we all wish to do, is how each partner is best able to bear the burden which falls after the War, and from that point of view I do not think anyone has any doubt that when you consider the immense natural resources of our Dominions they will be able to bear their share at least quite as well as the Mother Country will bear her share.
There is one) other consideration that I would put to my hon. and gallant Friend who moved this Amendment—and I feel sure he will not press it to a Division as he did last year—and that is that we are putting on additional taxation to the extent of a full year of £ 114,000,000. We are not asking anyone who pays double Income Tax to pay any part of this additional Income Tax. I really think that as Chancellor of the Exchequer I would not be justified in going further than in relieving them of all this additional taxation, and I hope that my hon. 1333 Friends who feel strongly on this point will agree that I have done as much as I can.
§ General CROFT
With every desire to try to meet my right hon. Friend's view, may I ask if he will give us any under taking that the matter will once more be placed before the Imperial Conference; and will the Chancellor himself undertake to see that there is an opportunity given to the Prime Ministers to reconsider the question, at any rate, so that when the Budget comes round next year the Chancellor will not have to tell us, "In another year's time "?
§ Mr. BONAR LAW
I think that is asking a great deal. I will undertake that the Prime Ministers shall be asked to discuss this subject; tout what my hon. and gallant Friend really asks is that I should invite them to deprive me of the argument which I have used from year to year.
§ Mr. BRACE
I think we are all grateful to the Chancellor of the Exchequer for not having increased the burden under this Clause this year, but I do not think he was very fortunate in his answer to the arguments which have been adduced, because the main part of them does not affect this question at all. The relative powers of this country, and of the Colonies, to bear taxation after the War does not affect the demand for a modification of this particular tax at this particular moment. I would like very much to ask whether the Treasury is taking particulars now of the amount of Revenue they are likely to lose by driving the concerns which are now conducted in this country, and are liable to double taxation, out of the country. I believe they will find that a great deal will be lost to the country by reason of the fact that concerns hitherto managed in this country, and which deal with Colonial money earned in the Colonies, are largely leaving this country, owing to the burden of this taxation, and getting themselves managed abroad, where they are doing their business? It seems to me we have never been able to find out exactly how much money is being earned by these taxes. I have asked several times, and we have always been told that it was not possible to obtain the figure. I suppose the adjustment is very slow, as it was a new thing on the present scale, and there must have been great difficulties in realising exactly how the incidence of the tax 1334 would operate, but by this time, as the tax has been running for two years, I think some knowledge ought to have been obtained, and we ought to be able to know exactly what is being realised by it. I think the hon. and gallant Member for Christchurch said that he thought it would amount to something like nine hours of the War. I should have thought it was less, but the Treasury ought by this time to be able to tell us something about what it is, and it seems to me that they ought to be making inquiries with regard to the amount of money which is likely to be lost by driving out of this country businesses hitherto managed here.
§ Amendment, by leave, withdrawn.
§ Motion made, and Question proposed,. "That the Clause stand part of the Bill."
§ Sir R. COOPER
The point that I desire to put is very difficult to frame, because in this Clause there is legislation by reference to two previous Acts. It concerns the problem of double Income Tax in the case of countries other than the Colonies. The Chancellor of the Ex chequer has quite clearly told us that the problem of the double Income Tax in the case of the Colonies is a very serious one, and that it is in the interests of this country and of British industry that we should get rid of it as soon as possible after the War. It is equally true that in the case of countries other than the Colonies the double Income Tax is bearing more and more heavily, and before long we shall have reached a point at which certain businesses must be absolutely crushed out of existence. Of course, if it is necessary to raise taxation in this manner and you can make sure, having crushed a business out of existence, that it is going to remain as a British possession and that the trade will be carried on by some other British firm, there may not probably be much to be said against the alteration, but I want to impress upon my hon. Friend this fact. In the United States at the present time the taxes. analogous to our Income Tax amount to 5s. 2d. in the £. Adding that to the 10s. 2d.—to take the extreme case—paid by people in this country, you have 15s. 4d., and seeing that Congress has notified its intention to add considerably to the taxes in the United States, it must be obvious that people who have interests in the United States, and there are a very large number of them, must reach a point when they will get no profit, when 1335 they are bound to suffer very severely, and when their businesses in many cases must come to an end. TheUnited States -desire as far as they possibly can to pay the largest possible share of their war expenditure out of income.
§ Sir R. COOPER
I wanted to put an Amendment in which was intended to -raise the question of relief from double Income Tax.
§ The DEPUTY-CHAIRMAN
It does not makeany difference; the point is that what the hon. Member is saying is not relevant to the Clause. This Clause deals with the Dominions and not with the United States.
§ Sir R. COOPER
I understood that this dealt with the question of the double Income Tax, which at present is confined to the Dominions. The Chancellor of the Exchequer spoke very widely on the sub ject, but if you say that I am out of Order I will give way and bow to your ruling.