§ If, on an application made by any individual, either at the time of making his return for the purposes of Super-tax for any year or within the time limited for appealing against the assessment upon him to Super-tax for that year, the applicant proves to the satisfaction of the Special Commissioners that, in consequence of the sale or transfer to him of any assets, The amount of Super-tax payable by him for that year exceeds by more than ten per cent. the amount of the Super-tax which would have been payable by him for that year if the income from those assets and from any assets sold or transferred by him were deemed to have accrued from day to day, then, for the purposes of any assessment to Super-tax in the case of that individual for that year, the income from all such assets as aforesaid shall be deemed to have accrued from day to day and to have been received by him as and when it is deemed to have accrued.—[Mr. Churchill.]
§ Brought up, and read the First time.
§ Motion made, and Question proposed, "That the Clause be read a Second time."—[Mr. Churchill.]
§ Mr. WILLIAM GRAHAM
I think it it only fair to the House that the right hon. Gentleman should give some explanation of the Clause?
§ The CHANCELLOR of the EXCHEQUER (Mr. Churchill)
This Clause, like most of those we are discussing to-day, certainly like all those the Government are discussing, partakes of the nature of a concession to the taxpayer. The object is to make our treatment of the question of sales ex and cum dividend even handed. The old Clause 31, which has now become 33, prescribes that in certain circumstances the Treasury shall have the right to collect Super-tax on sales cum dividend, but it was thought right at the same time to move the counter-part, namely that the taxpayer should have redress in cases where there was an exceptional purchasing of stock cum dividend. In no case is the matter material unless either on the one hand there is an avoidance of Super-tax in any given year on the balance to an extent of more than 10 per cent. by sales cum dividend, or on the other, as in this new 44 Clause, unless there is an extra burden thrown on the taxpayer of more than 10 per cent. in a given year through a balance of purchases cum dividend. We do not anticipate that any large number of claims for relief under the Clause will arise, but relief will be available whenever the taxpayer, in the proper exercise of his own affairs, may have purchased cum dividend on such a scale as to increase his Super-tax liability by the 10 per cent. indicated above. It does not go quite so far as the Clause moved by the hon. Member for Putney (Mr. S. Samuel). His Clause would have given relief from Super-tax by reference to the sole circumstance that the taxpayer has, in the course of the year of assessment, acquired a single holding of shares cum dividend, quite regardless of the fact that the same taxpayer in the same year might have sold other shares cum dividend. The original Clause 31 sought to restrict the practice of evading taxation by systematic sales cum-dividend, and we balance it by this redress to the taxpayer when, in the ordinary course, he has purchased cum-dividend to a similar extent. Therefore, the whole of this Clause, as of Clause 31, of which it is a counterpart, lies in an extremely restricted and exceptional sphere. Its usefulness will not often be called into play, but we believe that Clause 31, or Clause 33 as it now is, will certainly to a very large extent, if not entirely, stop the leakage in the revenue which has occurred from systematic sales cum-dividend, and we have balanced it at the same time by this new Clause, which secures the taxpayer in the event of his general transactions for the year having led to an extra burden of Super-tax exceeding 10 per cent. in consequence of his net purchases cum-dividend.
§ Mr. W. GRAHAM
The explanation which the Chancellor of the Exchequer has offered to the House is a reminder, of course, of the difficulty of dealing with matters of this kind on the Report stage or indeed on any stage of the Bill. But I think it will be quite impossible for us to agree on this side of the House that what we are doing here is to balance the two sides of one and the same problem. As I understand the Chancellor of the Exchequer's explanation, in the case of the purchasers of those shares, the steps he is taking 45 are to make certain that they are not called upon in any one year for Super-tax to the extent beyond which they are strictly liable. That is, if they can show to the Special Commissioners that their liability will be 10 per cent. greater than if the income had accrued from day to day, then they are entitled to relief under this Clause. May I make it perfectly plain that on that part of the proposition we on this side of the House can hardly object, because, after all, so long as we have Income Tax and Super-tax at all in this country we must not ask from the taxpayers more than they are strictly liable to pay under the legislation in force. We must not do anything unfair or unjust, and, accordingly, if we want to reduce this problem to the most accurate possible terms, then in this part of our discussion this afternoon the accrual from day to day would be a proper basis.
§ Mr. W. GRAHAM
It is, of course, the idea of the right hon. Gentleman's Clause, but he proceeds to anticipate a little and to refer to a new Clause 33, or rather to the old Clause 31, now numbered 33 on the Paper. While I should be out of order in discussing that Clause at this stage, I ought to reply to the right hon. Member's suggestion that you are here dealing with two sides of one problem. In point of fact, what you are doing in this Clause is to avoid calling upon the Super-tax-payer for something for which, in a very strict reading of Income Tax and Super-tax in this country, he is not liable. But the problem with which you are dealing in Clause 33 is something entirely different. You are there dealing, at a later stage, with the question of evasion, and, as we shall see at that later period of our discussion, the relief is given if the evasion does not go beyond 10 per cent. of the Super-tax for which he is liable within the year. All I want to do at this stage is to say that we on this side of the House cannot take exception to the present proposals of the Chancellor of the Exchequer, but we shall offer the very strongest exception later to any proposal which seeks to get rid of the difficulty of evasion merely because it is put on a 10 per cent. basis. With that we cannot for a moment agree, and 46 accordingly we take a different view from the right hon. Gentleman that what we have before us are merely two parts of one problem. To us they are different. We support this proposal. We shall oppose the second and later idea of the right hon. Gentleman.
§ Question put, and agreed to.
§ Clause read a Second time, and added to the Bill.