§ 55. Lieut.-Colonel HOWARD - BURYasked the Financial Secretary to the Treasury whether a man living in England and owning property in the Free State has to pay on his Irish property Income Tax to the Irish Free State at the rate of 5s. in the £ less 2s. 6d., the rebate allowed under the Dominion Income Tax Agreement; having therefore paid on his Irish income at the rate of 2s. 6d., has he then to pay upon it again in this country at the rate of 4s. 6d., a total of 7s. in the £; in the case of a man living in the Irish Free State and owning property in England, does he deduct 2s. 3d. (half the English rate of tax) for the Dominion allowance and then pay 5s. in the £ to the Irish Free State, a total Income Tax of 7s. 3d. in the 2; and can steps be taken to obviate this?
§ The FINANCIAL SECRETARY to the TREASURY (Sir William Joynson-Hicks)My hon. and gallant Friend is under a misapprehension. Arrangements have been made under which relief is allowable both from British Income Tax and from Irish Free State Income Tax on doubly-taxed income; with the broad result that the taxpayer is called upon to bear tax on such income at the higher of the two rates proper to his case, but no more. The arrangements are unavoidably complicated, and I will circulate in the OFFICIAL REPORT a statement dealing with this matter in greater detail. I should add, however, that the British authorities, and, as I understand, the Irish Free State authorities also, will make every endeavour to assist taxpayers in obtaining the relief to which they are entitled, and, in any case where it is possible, to grant the appropriate measure of relief without troubling the taxpayer to formulate a special claim.
§ Following is the statement:
§ Relief in respect of the double taxation of income between this country and the Irish Free State (just as between this country and other Dominions) proceeds by reduction of the rate of Income Tax to which a particular taxpayer would normally be liable and not by way of a 1159 deduction of any lump sum from the actual tax normally assessable.
§ It will be recalled that both British Income Tax and Super-tax and Irish Free State Income Tax and Super-tax are graduated taxes and different individuals bear different effective rates according to the circumstances of their cases.
§ In order to grant the proper relief from double taxation it is necessary in the case of any individual to determine the rates at which that individual pays British tax and Irish Free State tax respectively. An individual's rate of British Income Tax is determined by dividing the amount of Income Tax payable by him on his taxable income (i.e., his assessable income less personal and family allowances) by that taxable income. An individual's rate of British Super-tax is determined by dividing the amount of Super-tax payable by him by his total income as estimated for Super-tax purposes.
§ An individual's rates of Irish Free State Income Tax and Super-tax are determined on similar lines.
§ Where the taxpayer is liable to Super-tax his Income Tax and Super-tax rates are added together to arrive at the rate of tax appropriate to his case for the purpose of determining the measure of relief allowable.
§ Relief is granted from British Income Tax in respect of doubly taxed income at the lower of the two rates following:
- (1) The rate of Irish Free State tax appropriate to the taxpayer; and
- (2) one-half the rate of British tax appropriate to the taxpayer.
§ Taking what is at the present time the normal case, that is the case where the taxpayer's rate of Irish Free State tax exceeds his rate of relief from British Income Tax, relief from Irish Free State Income Tax is allowable at the lower of the two rates following:
- (1)The rate of relief allowable from British Income Tax; and
- (2) the excess of the rate of Irish Free State tax appropriate to the taxpayer over the rate of relief allowable from British Income Tax.
§ The relief applies in the case of a person who pays both British Income Tax 1160 and Irish Free State Income Tax in respect of the same income, irrespective of that person's place of residence.
§ The following instances illustrate the working of the provision. A person whose British rate of tax is, say, 4s. 2d. in the £, and whose Irish Free State rate of tax is, say, 4s. 8d. in the £, would, as respects the part of his income in respect of which he pays both British and Irish Free State Income Tax, be allowed relief from British Income Tax at 2s. 1d. in the £ (one-half his British rate, being less than his Irish Free State rate) and relief from Irish Free State Income Tax at 2s. 1d. in the £ (the rate of relief from British Income Tax, being less than the excess of his Irish Free State rate over the British rate of relief). After allowance of the reliefs, he ultimately bears British tax at the rate of 2s. 1d. in the £ and Irish Free State tax at the rate of 2s. 7d. in the £, i.e., a total rate of 4s. 8d. in the £.
§ Again, a person liable to British Super-tax with a British rate (for Income Tax and Super-tax combined) of, say, 5s. 6d. in the £, and an Irish Free State rate of, say, 4s. 10d. in the £, would be allowed relief from British Income Tax at 2s. 9d. in the £ (one-half his British rate) and relief from Irish Free State Income Tax at 2s. 1d. in the £ (the excess of his Irish Free State rate over the British rate of relief), and he would ultimately bear in all tax at the rate of 5s. 6d. in the £ (namely, 2s. 9d. British Tax and 2s. 9d. Irish Free State Tax).