§ The Stamp Duty chargeable under the Stamp Act, 1891, on bills of exchange of any kind whatsoever (except bank notes) and promissory notes of any kind whatsoever (except bank notes) drawn or expressed to be payable or actually paid or endorsed or in any manner negotiated in the United Kingdom shall be twopence in lieu of the duty now chargeable thereon and the rates of duty specified to be paid on such bills of exchange and such promissory notes in the First Schedule to the said Act shall cease to have effect.—[Mr. Petherick.]
§ Brought up, and read the First time.
§ 7.25 p.m.
§ The new Clause proposes to amend the Stamp Act, 1891, under which a certain schedule of stamp duties on bills of exchange is laid down. The new Clause applies only to bills of exchange and not to other negotiable instruments on which stamp duty has to be paid and its object is to reduce the scale of duty on those bills of exchange to a uniform rate of 2d. The present position is that ordinary bills of exchange, sight bills, or three days' sight bills, do pay 2d., but bills drawn for one month, three months or six months come under the schedule laid down in the Act of 1891. That schedule approximately fixes the stamp duty at 1s. for every £100 of bill drawn. Supposing a manufacturer were selling £1,000,000 worth of machinery and giving a year's credit the stamp duty under that schedule would amount to a very large sum. I agree that £1,000,000 is a large sum and that that is the kind of sale which everybody would like to make, but it is an easy sum for the purposes of an illustration. Supposing that 1614 in such a case the manufacturer is financing that transaction for the period of a year by means of four three-months' bills, one bill drawn when the machinery is delivered and three renewals, it will cost him no less than £2,000 in Stamp Duty. That is a very large sum, but it illustrates a state of things which affects, in larger or smaller degree, practically every manufacturer or trader in the country who has to give credits of that description.
§ This form of stamp duty to my mind is rather vicious for various reasons. First, it is a turnover tax on movements of goods, and where one can possibly avoid a turnover tax it is advisable to do so. It differs from stamp duty on Stock Exchange transactions, because in the latter case you are merely dealing with movements of ownership but in the other case you are taxing the definite movement of goods into consumption. Secondly, it is a definite burden on industry. In a case such as I have mentioned the £2,000 stamp duty might make all the difference in regard to an order obtained in competition with foreign countries and would considerably reduce the profit of the manufacturer. The third point which I wish to make in objection to this form of taxation is, that if I am selling any form of goods and am getting paid in cash, all that I have to pay is the 2d. for a formal receipt. If, on the other hand, I am giving credit for three months and drawing a bill, I am taking a risk; and it is a very curious thing that in the latter case I am paying a very much heavier stamp duty than if I am paying cash.
§ There is the question, of course, of the cost, which is very important, and it is a little difficult to make oneself clear on this point, because there is a rather odd difference in Governmental interpretation as between inland and foreign bills. The ordinary commercial understanding of the expression "inland bill" is a bill with two or more English names on it, and a foreign bill is either a bill with two or more foreign names on it or a bill with one English name and one foreign name, but the Governmental interpretation, the ordinary interpretation, for instance, in the Report of the Commissioners of Inland Revenue, is somewhat different. There the term "inland bill" means a bill drawn in the United Kingdom, and 1615 a foreign bill means a bill drawn out of the United Kingdom, even if drawn on foreigners. In assessing the cost of this Clause, if accepted, one has to look to the Report of the Commissioners of Inland Revenue, and one finds that it will cost, as regards inland bills, based on 1932–3, an amount of £222,000 in loss to the Exchequer, less, of course, the amount that they will get in 2d. stamps on every bill. For the preceding years it is actually rather more.
§ But when you come to assessing the cost of the foreign bills, it is extremely difficult to find out exactly what it would be, for this reason, that owing to the accepted definition for the purpose of the Inland Revenue Commissioners and such like, in the expression "foreign bills" and in the amounts returnable from the proceeds of the Stamp Duty on foreign bills are included not only bills drawn by foreigners on foreigners, but bills drawn by foreigners on the United Kingdom. Bills drawn by foreigners on foreigners come under a different category, because under the Finance Act of 1899 they were allowed to pay a cheaper rate of Stamp Duty. Why, I do not know, because it seems very odd to encourage the inflow into this country of foreign bills to be discounted on the London bill market and consequently to use funds which might normally be used properly for the financing of purely English trade. Therefore, I think it would undoubtedly cost something very close to the amount mentioned in the Report of the Commissioners of Inland Revenue, namely, £222,000, for inland bills, and something like £200,000—perhaps a little more or perhaps a little less—for foreign bills. I quite realise that this is a considerable amount, which may well make the Treasury very chary of considering the Clause, but at the same time I hope my hon. Friend the Financial Secretary to the Treasury, if he says it is impossible to make a concession now, will at least recognise the illogicality of the present tax on bills of exchange and admit the fact that, although it has been established for the last 40 years, it is at least rather an unsound tax and should be amended as soon as funds permit.
§ 7.36 p.m.
§ Sir WILLIAM WAYLAND
I should like to support this Clause, especially in 1616 regard to foreign bills. There are traders in this country who do what I might call a large small business in foreign countries, and the method of payment is almost invariably by bills. In these times, when competition is very keen and profits are very small, it would certainly be a help if the Stamp Duty on the foreign bill, the bill that we draw upon the foreigner for the amount of our invoices, could be reduced. In all foreign and Dominion cases I think 1d. would be quite sufficient in place of 1s. per £100, and it would certainly help in that respect.
§ 7.37 p.m.
§ Mr. HORE-BELISHA
The effect of this Clause would be to make the Stamp Duty on these bills a fixed duty of 2d., like the duty on cheques, instead of an ad valorem duty of 1s. per £100. The cost of accepting the Clause would be, it is estimated, £440,000 per annum, and I am sure that my hon. Friend, sincere as he was in moving it, would hardly expect it to be accepted, whatever its merits might be. I am sure the Committee listened with very great attention to all that he had to say, but I did not gather from his remarks that he was suggesting that the present duty on bills was responsible for any decline in their use. Had he made that case, I should have been prepared to answer him, because it is obvious that a duty of 4s. per cent. per annum cannot have very serious adverse effects.
§ Mr. PETHERICK
I do not understand what the hon. Gentleman means by saying 4s. per cent. per annum. It is not a case of per annum, because the Stamp Duty is on each bill and has nothing to do with per annum. If you draw a bill for a month, it is an actual duty.
§ Mr. HORE-BELISHA
I am assuming that the average term of a bill is put at three months, and I am giving my hon. Friend thereby the benefit of a higher figure. If, as I say, he were making any suggestion that the duty was having a restrictive effect upon these bills, I should have been prepared to answer him.
§ Mr. MACQUISTEN
Many times questions have been raised as to the diminution in the use of inland bills of exchange.
§ Mr. HORE-BELISHA
If one looks at the figures, the yield of the duty in 1928–9 was £395,260 on inland bills, whereas it has only fallen to-day to £217,000, and the yield on foreign bills has fallen from over £1,000,000 to £267,000, showing clearly that it is a decline in foreign trade; but, as I say, there has been no public demand for this Clause, though we were very interested to hear what the hon. Gentleman had to say, and if he desires to bring any further point to our notice later, we shall always be prepared to consider it. We do, however, await some more obvious public demand for a change of this kind, which would involve the Exchequer in so large a sum of money.
§ 7.40 p.m.
§ Mr. PETHERICK
I was interested in my hon. Friend's remarks, but if the Government are always going to rely on the principle of waiting for a large public demand before actually taking steps to remedy any injustice, it seems to me that you are opening the door to very extraordinary happenings. The amount involved is, I quite recognise, such that the acceptance of this Clause would have to be taken into very serious consideration by the Treasury at this moment, but I hope the hon. Member will consider it between now and next year. I beg to ask leave, however, to withdraw my Clause.
§ Motion and Clause, by leave, withdrawn.