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Rule 2 of the Miscellaneous Rules applicable to Schedule D of the Income Tax Act, 1918, shall be applied as though at the end thereof there were added the following paragraphs:—
(2) Notwithstanding the foregoing provision a person whose ordinary place of residence and domicile lies, or whose business, occupation, or profession is carried on, outside the United Kingdom or Northern Ireland shall not be chargeable with tax on any sum in excess of the amount of his annual expenditure in the United Kingdom or Northern Ireland, even though he may have been therein for periods exceeding six months of the year of assessment;
(3) The provisions of paragraph (2) shall also apply to a person ordinarily resident and domiciled abroad who retains a residence in the United Kingdom or Northern Ireland, and whose wife resides therein for reasons of health or for the purpose of the education of his children.—[Mr. Macquisten.]
§ Brought up, and read the First time.
§ Mr. MACQUISTENI beg to move, "That the Clause be read a Second time."
I desire to put the Chancellor of the Exchequer in the way of obtaining some more revenue, not at our expense, but from residents in this country whose incomes are earned abroad. I think it was in 1911 that the present arrangements came into force regarding such people. A person who earns his whole income abroad may be a native of this country who left here to seek his fortune and he may desire to return here for a period of time. He may, for example, be earning his income in the tropics, and if he is a married man with young children he may desire them to be brought up in his own country, and with this object he buys or rents a house and has a residence here. If he chooses to desert his wife for a whole year he is not liable for Income Tax on the income he makes abroad, but only on the money remitted to him here. If he returns home for a single day to the bosom of his family he is, however, charged Income Tax on his whole income, whether it is earned in the tropics or anywhere else. Of course, if we could exact this tax it would help us, and I would be only 462 too pleased, but we cannot do so. The result of the present system is that these gentlemen simply do not come home here to make a residence, and you find their wives living in Switzerland or elsewhere on the Continent, or else remaining in the tropics. In many cases the younger men who are earning incomes abroad do not marry at all, knowing that if they do so, and try to make a home here, they will be made liable to tax on their whole earnings, and it must be remembered that people working in the tropics expect to make a competence in a few years, because a man's health will not stand prolonged residence there.
The result of this penal legislation is that the Chancellor of the Exchequer loses a great deal of money. I am not speaking of the hardship to the individual though such hardship is involved, but we have no right to tax these people in this way. We cannot tax Australians any more than Americans, and it was as the result of an attempt to tax the Colonies that we lost America, and it seems a breach of hospitality when such people as I have described come here for a period, that they should be made liable for the maximum taxation if they make residence here for their families. I suppose it is on the principle of a legal maxim, Ubi uxor, ibi domus, or "A man's home is where his wife is," that they are taxed to the full, but it is a foolish thing to do in this instance, because we are keeping out many people who might otherwise come here and contribute substantially to our taxes. I know one case of a man who was going to settle in this country and buy one of those big houses which are now left untenanted by our own people. His spending of money would have been of great value in the district where he proposed to settle, but on taking legal advice he found he would be liable for the maximum Income Tax and Super-tax here, and he was already liable to the maximum taxation across the water. Instead of an income, he was going to have a substantial deficit after paying the double taxation, and so he did not come. My proposal is that the man should be taxed only on the money he brings here and spends here, and in that way we shall get more money for the revenue, because more such people will then make residences here. I have in mind another case of a man who sent me a letter 463 stating all the circumstances. He is a Scotsman.
§ Mr. B. SMITHDid he put a stamp on it?
§ Mr. MACQUISTENHe was in Scotland at the time. He intended to settle his wife and family here while he continued his occupation as a rubber planter abroad. I may say here that this system hits the rubber planters very hard and a great many of them are of Scottish extraction. When my informant found he was going to be taxed here on the whole income from his rubber estate, he said this was an inhospitable country and abandoned his plan. It is folly to tax people in this way and keep them out of the country when our rural districts would be all the better if we had them living in those districts and spending money there. But there is no moral right whatever to exact taxation when we have done nothing to create income which has been made abroad. I say we should encourage as many people as possible to come to this country and get as much as possible out of them when they are here, but we should not put our hands in their tills in other countries, when we have done nothing for it. I would ask the Chancellor of the Exchequer seriously to consider whether something cannot be done to meet this point.
§ Mr. CHURCHILLI cannot introduce anything into the Finance Bill, but the question as to what extent it is possible, and to what extent it is desirable, to claim taxes from a person, a portion of whose property lies outside the jurisdiction of this country, is one which should be carefully considered from the point of view of the greatest advantage to the Revenue and of the greatest advantage to this country. The proposal which my hon. and learned Friend has put down could, I think, be subjected to a very considerable measure of, I will not say destructive, but demolishing treatment. For instance, it would, I think, be possible for a millionaire in this country to establish a claim in respect of some company which he managed abroad as being his principal business, and so escape altogether taxation in this country. That, I am sure, is not what my hon. and learned Friend wants, but I do not wish to embark upon an argument with him. I do say this is 464 one of the many matters connected with the Income Tax which should certainly be examined, and examined with a new eye to see whether some greater advantage could not be gained.
§ Colonel GRANT MORDENThere are a great many Canadians and Australians who come over to this country, and who would like to maintain a residence here the year round. They cannot do it. They can remain here one day under six months, and then go back abroad again. There are Americans who do the same thing. There are hundreds of very rich Americans and very rich people from our own Dominions who would come and spend their money in this country, and I submit this Clause is a most valuable one. I do not at all agree with my right hon. Friend that anyone in this country could camouflage residence abroad by becoming a director of a company, and saying his income was derived overseas, because this would only apply to those resident in our overseas Dominions or in foreign countries, and I cannot see any reason at all why regulations cannot be devised so as to render impossible such a suggestion as the right hon. Member makes.
§ Question, "That the Clause be read a Second time," put, and negatived.
The CHAIRMANThe next Clause standing in the names of the hon. Member for Guildford (Sir H. Buckingham) and other hon. Members—(Protection of taxpayers summarily proceeded against)—I think should be raised in Committee of Supply on a definite Vote.