§ His Majesty's Government have recently been discussing with the Government of the Irish Free State certain outstanding financial questions, and the Committee will have been glad to see that we have arrived at a settlement of the problem of double Income Tax. That settlement was mixed up with the conclusion of a number of outstanding financial matters, upon which a full Report will be presented to the House, in conjunction with a similar Report when it is presented in Dublin. A copy of the agreement on the question of double Income Tax was last week laid before the House. The settlement is, briefly, that each country will tax only its own residents, and will exempt from taxation the income of persons resident in the other country, although the income arises within its own borders. Those who are resident in both countries will be chargeable by both, but given a measure of relief by both. This is a fair and reasonable arrangement. It will cost the Exchequer £200,000 in the first year, and £300,000 thereafter. The agreement, so far as it affects Income Tax, together with certain consequential alterations of the Income Tax code, will be included in the Finance Bill for confirmation by the House, and I propose to circulate with the Bill a Memorandum setting out the details of the scheme and the administrative arrangements involved.
§ Against the loss which I shall suffer in this matter, I can look forward to a prospective gain, not this year, but in 1927, of about £1,500,000 as the result of abandoning the three years' average. In the sphere of Income Tax, legislation is also required to correct a technical flaw revealed by the recent judgment in the case of Whelan v. Henning. This completes my treatment pf the Inland Revenue.