CLAUSE 33.—(Provisions for preventing avoidance of Super-tax by sale cum dividend, etc.) (Hansard, 19 July 1927)

§ Mr. WILLIAM GRAHAM

I beg to move, in page 23, line 9, to leave out the word "ten" and to insert instead thereof the word "five."

338 This is the Clause which deals with the avoidance of Super-tax by sales cum dividend. Originally the Chancellor of the Exchequer provided that the taxpayer should only become liable to this Clause if the amount avoided exceeded 5 per cent. of the amount of tax which he would be due to pay in the year if the income from those assets had been reckoned as accruing from day to day. Very much to our regret, the Chancellor of the Exchequer increased the percentage to 10 and the present Amendment is that the former figure of five should be restored. The right hon. Gentleman justified the course which he took on a previous occasion by suggesting that he was dealing in an earlier Clause with purchases cum dividend as the one side of the problem, and, as I understood him, in this Clause 33 the other side of the problem, namely, that of sales cum dividend was concerned. We tried to show, however, that on the earlier occasion we were dealing with the purchaser cum dividend and were seeking to avoid calling upon the Super-tax 339 payer for more than he was strictly bound to pay and that that was not, in the ordinary sense of the term, evasion at all; in fact, it was far removed from that altogether. But here we are dealing specifically with the question of evasion and we on this side of the House fail to see why you should only bring this Sub-section of the Clause into operation when the amount which has been avoided in Super-tax exceeds 10 per cent. of the sum for which the person would be liable, if the income had been deemed to accrue from day to day.

While we are dealing with evasion we should keep the amount of the unavoidable evasion, if I may so describe it, within the narrowest possible limits. We do not dispute that the Government are dealing with a very restricted part of the Super-tax operations in this country, but we must be very firm on any question of evasion. We are entitled to press that view in this connection, because later in the Clause there are ample safeguards for the Super-tax payer who finds himself in this position. If hon. Members will look a little further on they will see that this operates for all practical purposes only if there has been anything like a systematic attempt at evasion. Where the evasion is purely exceptional, this Clause will not apply at all, because all that the Super-tax payer requires to do is to satisfy the Special Commissioners on that point. I am unable to understand why the hon. Gentleman gave way on that, and we cannot for a moment concede that this is the other side of the problem to which he made reference earlier in the Debate, and accordingly I move that we restore the former figure of 5 per cent.

§ The CHANCELLOR of the EXCHEQUER (Mr. Churchill)

I hope my right hon. Friend the Member for Central Edinburgh (Mr. W. Graham) will not allow the arguments which I used yesterday on the new Clause which I moved, Clause 33, to be a stumbling block to him in approaching the general argument. It is quite true that I said that the Clause which gives the taxpayer relief in certain circumstances was a counterpart to the Clause which was imposing a more stringent test upon the taxpayer in other circumstances; but when I said the one was the counterpart of the other I only meant that in a very 340 general sense, in the sense of showing that the Exchequer in its relations with the taxpayer was not animated by predatory motives, but was quite ready to consider the opposite side of the case where this could be proved and to make amendments which gave more advantages to the taxpayer where his claim was sustained by reason and by justice. This particular proposal must be dealt with on its merits. Originally we proposed that where there had been an avoidance of Super-tax by sales of securities cum dividend, and where that avoidance exceeded 5 per cent., that then the process set out in the Clause should apply. I have now proposed that it should be 10 per cent. instead of 5 per cent. I do not think that from the point of view of the Exchequer there will be any difference. The Clause as now amended will in fact be an effectual deterrent on the habitual practice of evasion. The cases we had in view, those of people making a speciality of avoiding Super-tax by selling securities cum dividend, will be quite fully dealt with by the 10 per cent. limit, just exactly as they would be by the 5 per cent. limit; and there is no doubt that the insertion of 10 per cent. will give a greater measure of reassurance to the general mass of ordinary traders.

The active flow and movement of our markets and exchanges in London and the provinces is a matter of great public importance. It inures to the advantage of the revenue through the Stamp Duty, and, generally, all this vast higgling of the market, inspired though it may be to a large extent by speculation, tends to the higher refinement of business and the more exact quotation of the actual value of any commodity or shares at a given moment, and it has never been our purpose to do anything to throw sand in the wheels of this swiftly-moving mechanism. That is the last thing in the world we want to do. The stock exchanges of this country are a great source of wealth and fame to this country as a whole, and I should be shocked beyond words if it could be proved that anything in this Measure introduced to safeguard the revenue had really thrown any impediment in the course of business. Still more would it be wrong to throw such an impediment in the course of business when the same results can be obtained by making a somewhat wider limit and when a far greater measure of reassurance 341 will be given to the commercial public as a whole. I cannot think we shall suffer in any way and I have reason to believe that by making this legislation apply only to the exceptional cases of habitual evasion the ordinary flow of business will proceed unchecked, and as a matter of fact the malpractices against which Clause 31, now Clause 33, was originally directed will probably be brought almost entirely to a close by the very existence of the provision which we now ask Parliament to pass.