§
The following Rule shall be substituted for Rule 2 of the miscellaneous rules applicable to Schedule D: —
A person shall not be charged to tax under this Schedule as a person residing in the United Kingdom in respect of profits or gains received in respect of possessions or securities out of the United Kingdom who is in the United Kingdom for some temporary purpose; only, and not with any view or intent of establishing his residence therein, and who has not actually resided in the United Kingdom at one time or several times for a period equal in the whole to fifteen months in any two consecutive years of assessment, subject nevertheless as follows: —
§ Brought up, and read the First time.
1406§ Lieut.-Colonel ARCHER-SHEEI beg to move, "That the Clause be read a Second time."
1.0 A.M.
This Clause is directed to relieving certain visitors to this country from being assessed for Income Tax here. Under the present law, if they come to this country and stay for more than six months they are subject to Income Tax. I suggest that in doing this we are in a great many cases depriving the country of a lot of now money which we badly want. Large numbers of Americans come over here with large sums of money to spend, but directly they find that if they stay more than six months they will be subject to Income Tax they go off to France and other countries and spend the money there. That does not apply only to Americans; it applies to our fellow British subjects who may be residents in Australia, Canada or other parts of the Empire. I know concrete cases of people coming to this country with more than thousands of pounds, with tens of thousands of pounds, to spend, on a holiday of, perhaps, two years. People are not going to come to this country from Australia—a month's journey here and a month's journey back—and stay for six months only. They come over with the intention of spending a year or two in the country, and, being well-to-do people, they bring over large sums of money to spend. In a particular case that I know, the people immediately went off and spent all their money on the Continent and this country was deprived of it. In the case of people who wish to spend, perhaps, £10,000 or £20,000 in this country we are cutting off our nose to spite our face in charging them Income Tax. The money was not made in this country: it does not belong to this country in any way, and if people like to come here to spend it, it is a very good thing for those who live here, and that money in circulation is probably worth many times the amount which is actually brought in. The quick turnover from different trades and the spending of money in this country bring increased prosperity to the people of the country. At present the 1407 law is that if they stay here for six months they are subject to Income Tax. I believe Somerset House does take a lenient view in certain cases and allows certain exemptions and so on to people who only bring capital to this country and not income. At the same time, strictly according to law, if a man spends one day here over the six months he is subject to Income Tax. I suggest we are driving people away who would otherwise spend money here. Americans go to France far more than they come to this country— there may be other reasons for their going to France—but a very strong reason for their not coming here is that they are subject to Income Tax. I know it is so in many cases of which I have personal knowledge. Far too many of our own people go abroad and spend their money there. We want not only to keep our own people in this country and to circulate their money here, but we also want to encourage foreigners to come here.
§ Mr. KILEYI beg to second the Motion.
The reason I do so, is that I think the policy we are pursuing at the present time is not one in the best interests of this country. I have in my mind of a well to do Argentine family, who maintained a considerable establishment in this country and while the taxation was at the rate of one shilling in the pound or thereabouts they paid it gladly and cheerfully. But with Income Tax as it is now and with income not made in this country in any shape or form they found it so heavy that they decided to give up their establishment in this country and to live abroad. Whenever they desired to come to this country they proposed to do that by taking a furnished establishment for a few months in a year. In my judgment, that is not a good policy as far as we are concerned. If these people were able to live in this country, maintain a large establishment and spend substantial sums of money out of money, not made in this country but received from abroad, then we should encourage them to come instead of under present conditions driving them away.
§ Sir L. SCOTTI want the hon. and gallant Member who moved this Clause, if he will oblige me, to answer a question with the consent of the House. The Clause says that instead of the six months 1408 as the criterion of the period of any person who is a foreigner from the point of view of residence to come within assessment, you are to take fifteen months. It is obvious you cannot get fifteen months in the year of assessment, and it follows you are to take two years.
§ Lieut.-Colonel ARCHER-SHEEIt says so.
§ Sir L. SCOTTThe Clause says so. What I want to know is this. There are two ways in which this Clause can be interpreted. I want to know which is the way the Mover of it intends. Supposing that a person coming to this country spends five months in the first of the two years and ten months in the second of the two years, is it proposed that he should be taxed at all in respect of the first year I suppose not, and, in consequence, the proposal is that he should only be taxed in regard to the second year; or am I to understand that, supposing a foreigner comes to this country and spends the whole of the first year in this country, he is not to be taxed at all, although he is here for the whole year of assessment. Would the hon. and gallant Member be so good as to answer that?
§ Lieut.-Colonel ARCHER-SHEEMay I say that the suggestion in this Clause is that until he has been more than fifteen months in this country he shall not be assessed to Income Tax at all. Therefore the first year does not apply at all, and in the second year he would not be taxed until he has actually spent fifteen months in this country in the aggregate and not ten months in the second year.
§ Sir L. SCOTTI am much obliged. So that in the case where a man spends six months in the first year and nine months in the second year (whereas to-day he would be taxed in respect of both years) the proposal is that he should be taxed only for one year—the second year.
§ Lieut.-Colonel ARCHER-SHEEMy suggestion is that he should not be taxed at all until after he has spent 15 months in the country.
§ Sir L. SCOTTIf he spends six months in the first year and he goes on and spends another nine months in the next year, then I understand he will be taxed in the second year. [How. MEMBERS: "No !"] Then the proposal is that where to-day a 1409 person resides beyond the jurisdiction ordinarily and comes into this country and draws an income in this country from his foreign possessions or securities, he should escape tax which he does not escape to-day. Quite frankly, the Exchequer is not prepared to make this concession in regard to income in such circumstances. I venture to surmise that the effect of Income Tax in this country, at as high a rate as it is to-day, does result in keeping a certain number of people away, but this deterrent effect is not likely to be seriously permanent in the days which I hope may come before very long when taxation gets down to a reasonable level.
§ Sir FREDERICK YOUNGI think the principle underlying this Clause, apart from the actual wording of it and the difficulties which I freely confess arise with the wording such as it is—the principle behind it is thoroughly sound and for the benefit of this country and, as regards a certain portion of the proposition, very much to the benefit of the Empire concerning people coming from foreign countries, who realise in the main that the Income Tax is almost prohibitive for foreign people to come to this country for a certain length of time and pay the heavy double taxation on income which they have to pay in this country. I think we should face facts and realise that the heavy Income Tax is likely to prevail for many years. There is a great deal more lost in indirect taxation than the Exchequer would lose in direct taxation. As far as the Dominions are concerned, it may be said that the position has been met by the concessions already made on the principle announced by the learned Solicitor-General as the basis in this country. While the concession is a very valuable and a very helpful one for the people who are here for a considerable length of time, it does not really help the people who are here for a period of 18 months, two years or even 2½ years, because of the very difficult administrative troubles that arise in adjusting the taxation between this country and the particular part of the Dominions from which a person comes. The trouble that necessarily arises out of that concession is so great that it is an almost equal deterrent for the person coming over for a limited period. I confirm, from personal knowledge, the state- 1410 ment made that the deterrent does exist, and that people come for as limited a period as they can to avoid taxation. Were it not from the trouble arising from the Income Tax arrangement there is a great number of people from the Dominions who would come over for periods of 18 months and two years, and during these periods spend money very freely in this country, to the great advantage of industry throughout the Kingdom. I think that the spending of this money freely, as it would be spent by a great number of these people over a greater period, would prove of far greater value to this country than the taxation which is derived, because I am bound to say that a great number of these people avoid that taxation, either by making periodical trips to other parts and then coming back here so that their stay here is interrupted, or by the fact that their presence in this country is really not known, and they cannot always be traced. The result is that when the Income Tax falls to be paid it is never paid at all. None the less, the fact of having to avoid it keeps people away. Although it may not be possible to accept the wording as submitted, I hope the Government will give closer and deeper consideration to the Clause than one might imagine they had given from the answer supplied to-night by the learned Solicitor-General. There is a great deal more underlying this Clause from the Empire point of view which deserves consideration equal to that given by the Government to the other question of double Income Tax.
§ Mr. DENNIS HERBERTI am rather sorry the Government turned this down so definitely, and I should be interested to know if we could be told how much the Government would expect to lose if they were to agree to this Clause.
§ Sir L. SCOTTIt is very difficult to tell, but approximately a quarter of a million sterling.
§ Mr. HERBERTThat only confirms my view that the amount collected is comparatively trifling—[HON. MEMBERS: "Oh!"]—What I mean is that very few of these wealthy foreigners and colonials who come over to this country come over here in such a way as to render themselves liable to the tax. A quarter of a million means tax on about a million, and to tell me that a million represents anything like 1411 the money which is spent in this country by Americans alone, is more than anybody who has experience of them can believe, because immense numbers of them come over. What I want to point out is that the longer it goes on the smaller will become the quarter of a million, because it is only since taxation became higher within the last two years that it has become generally known to these foreigners how they can escape it.
What happens at the present time when wealthy people come over and want to stay for six months is that they have no income remitted to them at all. They accumulate their income in America and have a certain number of bonds sent over to this country which are sold, and they live in this country on the bond capital. They get outside the tax in this way and this is passed by the Revenue. The result is, therefore, that dealing with the class with which you are dealing, and the amount of money represented by these people and spent in this country, you are getting the tax in a very small proportion indeed. There are others who avoid it in the other way, by staying here just a day under six months, and then going abroad. If you can get these people to stay here anything like twelve months they do contribute something to the Exchequer in several other ways. They enjoy themselves, and they pay motor-car taxes and other similar taxes. I seriously suggest that if we cannot do anything on it this year, it should be a matter of consideration whether in future some Clause of this sort could not be introduced. I shall support it in the hope that it will benefit the Exchequer.
§ Question, "That the Clause be read a Second time," put, and negatived.